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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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FORM 10-Q



(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
|- | -------------------------------------------------------

| | SECURITIES EXCHANGE ACT OF 1934
| | -------------------------------



For the quarterly period ended February 29, 2004



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
|- | --------------------------------------------------------

| | SECURITIES EXCHANGE ACT OF 1934
| | -------------------------------



For the transition period from  to



Commission File Number 1-4887



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TEXAS INDUSTRIES, INC.

(Exact name of registrant as specified in the charter)



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 75-0832210                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)



|                                                      |  |           
|----------------------------------------------------- |  | ----------
|1341 West Mockingbird Lane, Suite 700W, Dallas, Texas |  | 75247-6913
|(Address of principal executive offices)              |  | (Zip Code)



Registrants
telephone number, including area code (972) 647-6700



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.  Yes  x  No ̈



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).  Yes  x  No ̈



As of April 5, 2004, 21,169,594 shares of Registrants
Common Stock, $1.00 par value, were outstanding.



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##### Table of Contents

INDEX



TEXAS INDUSTRIES, INC. AND
SUBSIDIARIES



|                              |  |                                                                                                                        |  |   
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | --
|                              |  | Page                                                                                                                  
|                              | 
|PART I. FINANCIAL INFORMATION |  |                                                                                                                       
|                              |  |                                                                                                                       
|Item 1.                       |  | Financial Statements                                                                                                   |  |   
|                              |  |                                                                                                                       
|                              |  | Consolidated Balance SheetsFebruary 29, 2004 and May 31, 2003                                                         |  | 3 
|                              |  |                                                                                                                       
|                              |  | Consolidated Statements of Operationsthree months and nine months ended February 29, 2004 and February 28, 2003       |  | 4 
|                              |  |                                                                                                                       
|                              |  | Consolidated Statements of Cash Flowsnine months ended February 29, 2004 and February 28, 2003                        |  | 5 
|                              |  |                                                                                                                       
|                              |  | Notes to Consolidated Financial Statements                                                                             |  | 6 
|                              |  |                                                                                                                       
|                              |  | Independent Accountants Review Report                                                                                 |  | 24
|                              |  |                                                                                                                       
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                  |  | 25
|                              |  |                                                                                                                       
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Riskthe information required by this item is included in Item 2 |  |  
|                              |  |                                                                                                                       
|Item 4.                       |  | Controls and Procedures                                                                                                |  | 33
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                       
|                              |  |                                                                                                                       
|Item 1.                       |  | Legal Proceedings                                                                                                      |  | 33
|                              |  |                                                                                                                       
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                                       |  | 33
|                              | 
|SIGNATURES                    |  | 34                                                                                                                    































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##### Table of Contents

CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                        |  |                             |           |   |             |   |           |  
|--------------------------------------- |  | --------------------------- | --------- | - | ----------- | - | --------- | -
|In thousands                            |  | (Unaudited)February 29,2004 |           |   | May 31,2003 |  
|                                        |  |                            
|ASSETS                                  |  |                             |           |   |             |   |           |  
|CURRENT ASSETS                          |  |                             |           |   |             |   |           |  
|Cash                                    |  | $                           | 56,802    |   |             | $ | 6,204     |  
|Receivablesnet                         |  |                             | 196,368   |   |             |   | 61,831    |  
|Inventories                             |  |                             | 261,969   |   |             |   | 270,773   |  
|Deferred taxes and prepaid expenses     |  |                             | 33,063    |   |             |   | 37,375    |  
|                                        |  |                             |           |   |             |   |           |  
|TOTAL CURRENT ASSETS                    |  |                             | 548,202   |   |             |   | 376,183   |  
|                                        |  |                            
|OTHER ASSETS                            |  |                             |           |   |             |   |           |  
|Goodwill                                |  |                             | 146,474   |   |             |   | 146,474   |  
|Real estate and investments             |  |                             | 48,880    |   |             |   | 43,600    |  
|Deferred charges and intangibles        |  |                             | 40,945    |   |             |   | 23,985    |  
|                                        |  |                             |           |   |             |   |           |  
|                                        |  |                             | 236,299   |   |             |   | 214,059   |  
|PROPERTY, PLANT AND EQUIPMENT           |  |                             |           |   |             |   |           |  
|Land and land improvements              |  |                             | 227,432   |   |             |   | 218,687   |  
|Buildings                               |  |                             | 99,944    |   |             |   | 101,490   |  
|Machinery and equipment                 |  |                             | 1,711,772 |   |             |   | 1,712,285 |  
|Construction in progress                |  |                             | 44,977    |   |             |   | 47,724    |  
|                                        |  |                             |           |   |             |   |           |  
|                                        |  |                             | 2,084,125 |   |             |   | 2,080,186 |  
|Less depreciation and depletion         |  |                             | 996,266   |   |             |   | 940,818   |  
|                                        |  |                             |           |   |             |   |           |  
|                                        |  |                             | 1,087,859 |   |             |   | 1,139,368 |  
|                                        |  |                             |           |   |             |   |           |  
|                                        |  | $                           | 1,872,360 |   |             | $ | 1,729,610 |  
|                                        |  |                             |           |   |             |   |           |  
|                                        |  |                            
|LIABILITIES AND SHAREHOLDERS EQUITY    |  |                             |           |   |             |   |           |  
|CURRENT LIABILITIES                     |  |                             |           |   |             |   |           |  
|Trade accounts payable                  |  | $                           | 109,972   |   |             | $ | 120,477   |  
|Accrued interest, wages and other items |  |                             | 57,331    |   |             |   | 43,376    |  
|Current portion of long-term debt       |  |                             | 703       |   |             |   | 732       |  
|                                        |  |                             |           |   |             |   |           |  
|TOTAL CURRENT LIABILITIES               |  |                             | 168,006   |   |             |   | 164,585   |  
|                                        |  |                            
|LONG-TERM DEBT                          |  |                             | 610,937   |   |             |   | 477,145   |  
|                                        |  |                            
|CONVERTIBLE SUBORDINATED DEBENTURES     |  |                             | 199,937   |   |             |   | 199,937   |  
|                                        |  |                            
|DEFERRED INCOME TAXES AND OTHER CREDITS |  |                             | 169,871   |   |             |   | 160,434   |  
|                                        |  |                            
|SHAREHOLDERS EQUITY                    |  |                             |           |   |             |   |           |  
|Common stock, $1 par value              |  |                             | 25,067    |   |             |   | 25,067    |  
|Additional paid-in capital              |  |                             | 261,256   |   |             |   | 260,936   |  
|Retained earnings                       |  |                             | 532,563   |   |             |   | 538,584   |  
|Cost of common stock in treasury        |  |                             | (89,385   | ) |             |   | (91,186   | )
|Pension liability adjustment            |  |                             | (5,892    | ) |             |   | (5,892    | )
|                                        |  |                             |           |   |             |   |           |  
|                                        |  |                             | 723,609   |   |             |   | 727,509   |  
|                                        |  |                             |           |   |             |   |           |  
|                                        |  | $                           | 1,872,360 |   |             | $ | 1,729,610 |  
|                                        |  |                             |           |   |             |   |           |  



See
notes to consolidated financial statements.





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(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|----------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | ---------------- |  | - | ---------------- | - |  | - | --------- | -
|                                                            |  | Three months ended |         |   | Nine months ended |  
|In thousands except per share                               |  | February 29,2004   |         |   | February 28,2003  |   |         | February 29,2004 |  |   | February 28,2003 |  
|NET SALES                                                   |  | $                  | 407,970 |   |                   | $ | 296,411 |                  |  | $ | 1,152,567        |   |  | $ | 1,000,078 |  
|                                                            |  |                    |         |  
|COSTS AND EXPENSES (INCOME)                                 |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|Cost of products sold                                       |  |                    | 368,746 |   |                   |   | 288,169 |                  |  |   | 1,055,250        |   |  |   | 927,339   |  
|Selling, general and administrative                         |  |                    | 22,877  |   |                   |   | 23,394  |                  |  |   | 73,152           |   |  |   | 71,227    |  
|Interest                                                    |  |                    | 17,961  |   |                   |   | 11,231  |                  |  |   | 55,884           |   |  |   | 34,121    |  
|Loss on early retirement of debt                            |  |                    |        |   |                   |   |        |                  |  |   | 11,246           |   |  |   |          |  
|Other income                                                |  |                    | (36,601 | ) |                   |   | (447    | )                |  |   | (42,887          | ) |  |   | (2,953    | )
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|                                                            |  |                    | 372,983 |   |                   |   | 322,347 |                  |  |   | 1,152,645        |   |  |   | 1,029,734 |  
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|INCOME (LOSS) BEFORE THE FOLLOWING ITEMS                    |  |                    | 34,987  |   |                   |   | (25,936 | )                |  |   | (78              | ) |  |   | (29,656   | )
|                                                            |  |                    |         |  
|Income taxes (benefit)                                      |  |                    | 14,098  |   |                   |   | (8,718  | )                |  |   | 124              |   |  |   | (13,013   | )
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE |  |                    | 20,889  |   |                   |   | (17,218 | )                |  |   | (202             | ) |  |   | (16,643   | )
|                                                            |  |                    |         |  
|Cumulative effect of accounting changenet of tax           |  |                    |        |   |                   |   |        |                  |  |   | (1,071           | ) |  |   |          |  
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|NET INCOME (LOSS)                                           |  | $                  | 20,889  |   |                   | $ | (17,218 | )                |  | $ | (1,273           | ) |  | $ | (16,643   | )
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|                                                            |  |                    |         |  
|Basic earnings (loss) per share:                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|Income (loss) before cumulative effect of accounting change |  | $                  | .99     |   |                   | $ | (.81    | )                |  | $ | (.01             | ) |  | $ | (.79      | )
|Cumulative effect of accounting change                      |  |                    |        |   |                   |   |        |                  |  |   | (.05             | ) |  |   |          |  
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|Net income (loss)                                           |  | $                  | .99     |   |                   | $ | (.81    | )                |  | $ | (.06             | ) |  | $ | (.79      | )
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|Diluted earnings (loss) per share:                          |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|Income (loss) before cumulative effect of accounting change |  | $                  | .92     |   |                   | $ | (.81    | )                |  | $ | (.01             | ) |  | $ | (.79      | )
|Cumulative effect of accounting change                      |  |                    |        |   |                   |   |        |                  |  |   | (.05             | ) |  |   |          |  
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|Net income (loss)                                           |  | $                  | .92     |   |                   | $ | (.81    | )                |  | $ | (.06             | ) |  | $ | (.79      | )
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|                                                            |  |                    |         |  
|Average shares outstanding:                                 |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|Basic                                                       |  |                    | 21,189  |   |                   |   | 21,129  |                  |  |   | 21,163           |   |  |   | 21,119    |  
|Diluted                                                     |  |                    | 24,688  |   |                   |   | 21,129  |                  |  |   | 21,163           |   |  |   | 21,119    |  
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  
|Cash dividends per share                                    |  | $                  | .075    |   |                   | $ | .075    |                  |  | $ | .225             |   |  | $ | .225      |  
|                                                            |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |           |  



See
notes to consolidated financial statements.



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(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                  |  |                   |          |   |                  |   |          |  
|------------------------------------------------- |  | ----------------- | -------- | - | ---------------- | - | -------- | -
|                                                  |  | Nine months ended |         
|In thousands                                      |  | February 29,2004  |          |   | February 28,2003 |  
|                                                  |  |                  
|OPERATING ACTIVITIES                              |  |                   |          |   |                  |   |          |  
|Net loss                                          |  | $                 | (1,273   | ) |                  | $ | (16,643  | )
|Cumulative effect of accounting changenet of tax |  |                   | 1,071    |   |                  |   |         |  
|Loss on early retirement of debt                  |  |                   | 11,246   |   |                  |   |         |  
|Loss (gain) on disposal of assets                 |  |                   | (35,516  | ) |                  |   | 1,053    |  
|Non-cash items                                    |  |                   |          |   |                  |   |          |  
|Depreciation, depletion and amortization          |  |                   | 72,897   |   |                  |   | 72,977   |  
|Deferred taxes (benefit)                          |  |                   | (731     | ) |                  |   | (13,426  | )
|Othernet                                         |  |                   | 5,204    |   |                  |   | 4,861    |  
|Changes in operating assets and liabilities       |  |                   |          |   |                  |   |          |  
|Receivables repurchased                           |  |                   | (115,514 | ) |                  |   | (14,071  | )
|Receivablesnet                                   |  |                   | (19,249  | ) |                  |   | 22,227   |  
|Inventories and prepaid expenses                  |  |                   | 15,082   |   |                  |   | (15,067  | )
|Accounts payable and accrued liabilities          |  |                   | 5,186    |   |                  |   | 6,735    |  
|Real estate and investments                       |  |                   | 618      |   |                  |   | 2,351    |  
|                                                  |  |                   |          |   |                  |   |          |  
|Net cash provided (used) by operations            |  |                   | (60,979  | ) |                  |   | 50,997   |  
|                                                  |  |                  
|INVESTING ACTIVITIES                              |  |                   |          |   |                  |   |          |  
|Capital expenditures                              |  |                   | (24,725  | ) |                  |   | (41,094  | )
|Proceeds from disposal of assets                  |  |                   | 40,065   |   |                  |   | 10,974   |  
|Othernet                                         |  |                   | (1,575   | ) |                  |   | (683     | )
|                                                  |  |                   |          |   |                  |   |          |  
|Net cash provided (used) by investing             |  |                   | 13,765   |   |                  |   | (30,803  | )
|                                                  |  |                  
|FINANCING ACTIVITIES                              |  |                   |          |   |                  |   |          |  
|Long-term borrowings                              |  |                   | 718,097  |   |                  |   | 221,940  |  
|Debt retirements                                  |  |                   | (592,052 | ) |                  |   | (238,415 | )
|Debt issuance costs                               |  |                   | (16,373  | ) |                  |   |         |  
|Debt retirement costs                             |  |                   | (8,505   | ) |                  |   |         |  
|Common dividends paid                             |  |                   | (4,748   | ) |                  |   | (4,736   | )
|Othernet                                         |  |                   | 1,393    |   |                  |   | (919     | )
|                                                  |  |                   |          |   |                  |   |          |  
|Net cash provided (used) by financing             |  |                   | 97,812   |   |                  |   | (22,130  | )
|                                                  |  |                   |          |   |                  |   |          |  
|Increase (decrease) in cash                       |  |                   | 50,598   |   |                  |   | (1,936   | )
|                                                  |  |                  
|Cash at beginning of period                       |  |                   | 6,204    |   |                  |   | 7,430    |  
|                                                  |  |                   |          |   |                  |   |          |  
|Cash at end of period                             |  | $                 | 56,802   |   |                  | $ | 5,494    |  
|                                                  |  |                   |          |   |                  |   |          |  



See
notes to consolidated financial statements.





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##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Texas Industries, Inc. and subsidiaries (unless the context indicates otherwise, collectively, the Company or TXI) is a leading supplier of construction materials through two business segments:
cement, aggregate and concrete products (the CAC segment); and structural steel and specialty bar products (the Steel segment). Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, expanded
shale and clay aggregate, and concrete products from facilities concentrated in Texas, Louisiana and California, with several products marketed throughout the United States. Through the Steel segment, the Company produces and sells structural steel,
piling products, specialty bar products, merchant bar-quality rounds, reinforcing bar and channels from facilities located in Texas and Virginia, for markets in North America.



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month period ended February
29, 2004, are not necessarily indicative of the results that may be expected for the year ended May 31, 2004. For further information, refer to the consolidated financial statements and footnotes thereto included in the Companys Annual Report
on Form 10-K for the year ended May 31, 2003.



Principles of
Consolidation. The consolidated financial statements include the accounts of Texas Industries, Inc. and all subsidiaries except a subsidiary trust in which the Company has a variable interest but is not the primary beneficiary as discussed in
New Accounting Pronouncements on page 10. Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.



Estimates. The preparation of financial statements and accompanying notes in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.



Cash Equivalents. For cash flow purposes, temporary investments which have maturities of less than 90 days when purchased are considered cash
equivalents.



Receivables.Management evaluates the
ability to collect accounts receivable based on a combination of factors. A reserve for doubtful accounts is maintained based on the length of time receivables are past due or the status of a customers financial condition. If the Company is
aware of a specific customers inability to make required payments, specific amounts are added to the reserve.



Environmental Liabilities.The Company is subject to environmental laws and regulations established by federal, state and local authorities, and
makes provision for the estimated costs related to compliance when it is probable that a reasonably estimable liability has been incurred.



Legal Contingencies.The Company and its subsidiaries are defendants in lawsuits which arose in the normal course of business, and make provision
for the estimated loss from any claim or legal proceeding when it is probable that a reasonably estimable liability has been incurred.



Long-lived Assets.Management reviews long-lived assets for impairment whenever changes in circumstances indicate that the carrying amount of the
assets may not be recoverable and would record an impairment charge if necessary. Such evaluations compare the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset and are significantly impacted by
estimates of future prices for the Companys products, capital needs, economic trends and other factors.



Property, plant and equipment is recorded at cost. Provisions for depreciation are computed generally using the straight-line method. Provisions for
depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. Useful lives for the Companys primary operating facilities range from 10 to 20 years. Maintenance and repairs are charged to
expense as incurred. Costs incurred for scheduled shut-downs to refurbish the Steel facilities are amortized over the benefited period, typically 12 to 24 months.



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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued



Goodwill and Other Intangible Assets. Management tests goodwill for
impairment at least annually by each reporting unit. If the carrying amount of the goodwill exceeds its fair value an impairment loss is recognized. In applying a fair-value-based test, estimates are made of the expected future cash flows to be
derived from the applicable reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for the Companys products, capital
needs, economic trends and other factors. Goodwill identified with CACs California cement operations resulted from the acquisition of Riverside Cement Company. Goodwill identified with Steels Texas operations resulted from the
acquisition of Chaparral Steel Company. In each case the fair value of the respective reporting unit exceeds its carrying value. At both February 29, 2004 and May 31, 2003, the carrying value of CAC goodwill was $61.3 million and the carrying value
of Steel goodwill was $85.2 million.



Deferred charges and
intangibles include non-compete agreements and other intangibles with finite lives being amortized on a straight-line basis over periods of 5 to 15 years. Their carrying value, adjusted for write-offs, total $2.2 million, net of accumulated
amortization of $3.9 million at February 29, 2004 and $2.5 million, net of accumulated amortization of $3.6 million at May 31, 2003. Amortization expense incurred was $300,000 and $700,000 in the nine-month periods ended February 29, 2004 and
February 28, 2003, respectively. Estimated annual amortization for each of the five succeeding years is $400,000, $300,000, $300,000, $300,000 and $300,000.



Real Estate and Investments.Surplus real estate and real estate acquired for development of high quality industrial and multi-use parks, recorded
at cost, totaled $11.2 million and $11.6 million at February 29, 2004 and May 31, 2003, respectively. Investments totaled $37.7 million and $32.0 million at February 29, 2004 and May 31, 2003, respectively. Investments are composed primarily of life
insurance contracts, which are recorded at their net cash surrender value and may be used to fund certain Company benefit agreements. The Company does not invest in debt or equity securities.



Debt Issuance Costs.Debt issuance costs of $21.3 million and $9.7
million at February 29, 2004 and May 31, 2003, respectively, are associated with various debt issues and amortized over the terms of the related debt.



Other Credits.Other credits of $53.6 million and $44.8 million at February 29, 2004 and May 31, 2003, respectively, are composed primarily of
liabilities related to the Companys retirement plans, deferred compensation agreements and asset retirement obligations.



Asset Retirement Obligations.Effective June 1, 2003, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 143,
Accounting for Asset Retirement Obligations, which applies to legal obligations associated with the retirement of long-lived assets.



SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a
reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the
end of each period through charges to operating expenses. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain or loss on settlement.



The Company incurs legal obligations for asset retirement as part of its
normal CAC and Steel operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. Prior to the adoption of SFAS No. 143, the Company generally accrued for land reclamation obligations related to its
aggregate mining process on the unit of production basis and for its other obligations as incurred. Determining the amount of an asset retirement liability requires estimating the future cost of contracting with third parties to perform the
obligation. The estimate is significantly impacted by, among other considerations, managements assumptions regarding the scope of the work required, labor costs, inflation rates, market-risk premiums and closure dates. The initial application
of the new rules resulted in an increase in net property, plant and equipment of $500,000, a net increase in asset retirement obligation liabilities of $2.2 million and a pre-tax cumulative charge of $1.7 million.



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##### Table of Contents

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued



Changes in asset retirement obligations for the nine-month period ended
February 29, 2004 are as follows:



|                       |  |   |       |  
|---------------------- |  | - | ----- | -
|Balance at June 1      |  | $ | 4,092 |  
|Accretion expense      |  |   | 267   |  
|Payments               |  |   | (164  | )
|Revisions              |  |   | 554   |  
|                       |  |   |       |  
|Balance at February 29 |  | $ | 4,749 |  
|                       |  |   |       |  



Pro forma effects for
the periods presented, assuming adoption of SFAS No. 143 retroactively, were not material to net income (loss) or the related per-share amounts.



Pension Liability Adjustment.The pension liability adjustment to shareholders equity of $5.9 million at both February 29, 2004 and May 31,
2003 (net of tax of $3.2 million) relates to a defined benefit retirement plan covering approximately 600 employees and retirees of an acquired subsidiary. Comprehensive income or loss consists of net income or loss and the pension liability
adjustment to shareholders equity. Comprehensive income (loss) for the three-month and nine-month periods ended February 29, 2004 was the same as net income (loss). Comprehensive loss for the three-month and nine-month periods ended February
28, 2003 was $17.0 million and $17.3 million, respectively.



Net Sales. Sales are recognized when title has transferred and products are delivered. Historically, the Company has included delivery fees in the amount it billed customers to the extent needed to recover the Companys cost of
freight and delivery. Net sales were presented as revenues including delivery fees offset by freight and delivery costs and were disclosed as such. The Emerging Issues Task Force of the FASB reached a final consensus on Issue No. 00-10,
Accounting for Shipping and Handling Fees and Costs. EITF 00-10 addresses the income statement classification of amounts charged to customers for shipping and handling, as well as costs incurred related to shipping and handling. The EITF
concluded that amounts billed to a customer in a sale transaction related to shipping and handling should be classified as revenue. The EITF also concluded that if costs incurred related to shipping and handling are significant and not included in
cost of sales, an entity should disclose both the amount of such costs and the line item on the income statement that includes them. In connection with this issue, the Company currently classifies freight and delivery costs in cost of products sold.
To conform to the current presentation freight and delivery costs of approximately $22.8 million and $77.0 million in the three-month and nine-month periods ended February 28, 2003, respectively, have been reclassified from net sales to cost of
products sold. This reclassification had no effect on the Companys results of operations or financial position.



Other Income.Other income in the three-month and nine-month periods ended February 29, 2004 includes a $34.4 million gain from the sale of the
Companys Texas and Louisiana brick production facilities. Other income in the nine-month period ended February 29, 2004, also includes $4.2 million from the Companys litigation against certain graphite electrode suppliers.



Income Taxes. Accounting for income taxes uses the liability method of
recognizing and classifying deferred income taxes. The Company joins in filing a consolidated return with its subsidiaries. Current and deferred tax expense is allocated among the members of the group based on a stand-alone calculation of the tax of
the individual member.



Earnings Per Share(EPS). Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the period including certain contingently issuable shares. Diluted EPS adjusts net income and the outstanding
shares for the dilutive effect of convertible subordinated debentures, stock options and awards.



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##### Table of Contents

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued



Basic and Diluted EPS are calculated as follows:



|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|--------------------------------------------- |  | ------------------ | ------ | ---------------- | ----------------- | ------- | ---------------- |  | - | ---------------- | - |  | - | ------- | -
|                                              |  | Three months ended |        |                  | Nine months ended |        
|In thousands except per share                 |  | February 29,2004   |        | February 28,2003 |                   |         | February 29,2004 |  |   | February 28,2003 |  
|                                              |  |                    |        |                 
|Earnings:                                     |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Income (loss) before cumulative effect        |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|of accounting change                          |  | $                  | 20,889 |                  | $                 | (17,218 | )                |  | $ | (202             | ) |  | $ | (16,643 | )
|Cumulative effect of accounting change        |  |                    |       |                  |                   |        |                  |  |   | (1,071           | ) |  |   |        |  
|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Net income (loss)                             |  | $                  | 20,889 |                  | $                 | (17,218 | )                |  | $ | (1,273           | ) |  | $ | (16,643 | )
|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|                                              |  |                    |        |                 
|Shares:                                       |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Weighted-average shares outstanding           |  |                    | 21,120 |                  |                   | 21,055  |                  |  |   | 21,092           |   |  |   | 21,045  |  
|Contingently issuable shares                  |  |                    | 69     |                  |                   | 74      |                  |  |   | 71               |   |  |   | 74      |  
|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Basic weighted-average shares                 |  |                    | 21,189 |                  |                   | 21,129  |                  |  |   | 21,163           |   |  |   | 21,119  |  
|                                              |  |                    |        |                 
|Convertible subordinated debentures           |  |                    | 2,888  |                  |                   |        |                  |  |   |                 |   |  |   |        |  
|Stock option and award dilution               |  |                    | 611    |                  |                   |        |                  |  |   |                 |   |  |   |        |  
|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Diluted weighted-average shares*              |  |                    | 24,688 |                  |                   | 21,129  |                  |  |   | 21,163           |   |  |   | 21,119  |  
|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|                                              |  |                    |        |                 
|Basic earnings (loss) per share:              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Income (loss) before cumulative effect        |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|of accounting change                          |  | $                  | .99    |                  | $                 | (.81    | )                |  | $ | (.01             | ) |  | $ | (.79    | )
|Cumulative effect of accounting change        |  |                    |       |                  |                   |        |                  |  |   | (.05             | ) |  |   |        |  
|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Net income (loss)                             |  | $                  | .99    |                  | $                 | (.81    | )                |  | $ | (.06             | ) |  | $ | (.79    | )
|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|                                              |  |                    |        |                 
|Diluted earnings (loss) per share:            |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Income (loss) before cumulative effect        |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|of accounting change                          |  | $                  | .92    |                  | $                 | (.81    | )                |  | $ | (.01             | ) |  | $ | (.79    | )
|Cumulative effect of accounting change        |  |                    |       |                  |                   |        |                  |  |   | (.05             | ) |  |   |        |  
|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Net income (loss)                             |  | $                  | .92    |                  | $                 | (.81    | )                |  | $ | (.06             | ) |  | $ | (.79    | )
|                                              |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|                                              |  |                    |        |                 
|* Shares excluded due to antidilutive effect: |  |                    |        |                  |                   |         |                  |  |   |                  |   |  |   |         |  
|Convertible subordinated debentures           |  |                    |       |                  |                   | 2,888   |                  |  |   | 2,888            |   |  |   | 2,888   |  
|Stock options and awards                      |  |                    | 756    |                  |                   | 2,576   |                  |  |   | 3,262            |   |  |   | 2,461   |  



Contingently
issuable shares relate to deferred compensation agreements in which directors elected to defer annual and meeting fees or executives elected to defer incentive compensation and vested shares under the Companys former stock awards program. The
shares are considered contingently issuable because the director or executive has an unconditional right to the shares to be issued. The deferred compensation is denominated in shares of the Companys common stock and issued upon retirement or
at such earlier date as approved by the Company. Vested stock award shares are issued in the year in which the employee reaches age 60.



Stock-based Compensation.The Company accounts for employee stock options using the intrinsic value method of accounting prescribed by APB Opinion
No. 25, Accounting for Stock Issued to Employees, as allowed by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, (SFAS No. 123). Generally, no expense is recognized
related to the Companys stock options because each options exercise price is set at the stocks fair market value on the date the option is granted.



In accordance with SFAS No. 123, the Company discloses the compensation cost based on the estimated fair value at the date
of grant recognizing compensation expense ratably over the vesting period.



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##### Table of Contents

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-Continued



If the Company had recognized compensation expense for the stock option plan
based on the fair value at the grant dates for awards, the Companys net income (loss) and earnings (loss) per share would have been reduced to the following pro forma amounts:



|                                              |  |                    |        |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|--------------------------------------------- |  | ------------------ | ------ | - | ----------------- | - | ------- | ---------------- |  | - | ---------------- | - |  | - | ------- | -
|                                              |  | Three months ended |        |   | Nine months ended |  
|In thousands except per share                 |  | February 29,2004   |        |   | February 28,2003  |   |         | February 29,2004 |  |   | February 28,2003 |  
|                                              |  |                    |        |  
|Net income (loss)                             |  |                    |        |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|As reported                                   |  | $                  | 20,889 |   |                   | $ | (17,218 | )                |  | $ | (1,273           | ) |  | $ | (16,643 | )
|Plus: stock-based compensation included       |  |                    |        |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|in the determination of net income            |  |                    |        |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|as reported, net of tax                       |  |                    | 1,147  |   |                   |   | 243     |                  |  |   | 1,291            |   |  |   | 248     |  
|Less: fair value of stock-based compensation, |  |                    |        |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|net of tax                                    |  |                    | (1,975 | ) |                   |   | (1,036  | )                |  |   | (3,964           | ) |  |   | (2,711  | )
|                                              |  |                    |        |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|Pro forma                                     |  | $                  | 20,061 |   |                   | $ | (18,011 | )                |  | $ | (3,946           | ) |  | $ | (19,106 | )
|                                              |  |                    |        |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|                                              |  |                    |        |  
|Basic earnings (loss) per share               |  |                    |        |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|As reported                                   |  | $                  | .99    |   |                   | $ | (.81    | )                |  | $ | (.06             | ) |  | $ | (.79    | )
|Pro forma                                     |  |                    | .95    |   |                   |   | (.85    | )                |  |   | (.19             | ) |  |   | (.90    | )
|                                              |  |                    |        |  
|Diluted earnings (loss) per share             |  |                    |        |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|As reported                                   |  | $                  | .92    |   |                   | $ | (.81    | )                |  | $ | (.06             | ) |  | $ | (.79    | )
|Pro forma                                     |  |                    | .89    |   |                   |   | (.85    | )                |  |   | (.19             | ) |  |   | (.90    | )



New Accounting
Pronouncements.Effective June 1, 2003, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. For most companies, SFAS No. 145 will require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under SFAS No. 4.
Extraordinary treatment will be required for certain extinguishments as provided in APB Opinion No. 30. SFAS No. 145 also amends SFAS No. 13 to require certain modifications to capital leases be treated as a sale-leaseback and modifies the
accounting for sub-leases when the original lessee remains a secondary obligor (or guarantor). Its adoption required that the loss on early retirement of debt incurred in the nine-month period ended February 29, 2004 be recognized as an ordinary
loss.



Effective June 1, 2003, the Company adopted SFAS No.
150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both
liabilities and equity. The Company had no financial instruments for which a change in classification was required.



Effective February 29, 2004, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. Prior to its adoption the Company consolidated all majority owned subsidiaries. FIN 46 provides that a variable interest entity is to be consolidated by its primary beneficiary. The Company
has a variable interest in a subsidiary trust that has mandatorily redeemable preferred securities outstanding with a liquidation value of $199.9 million. These securities were previously reported on the Companys balance sheet as
Company-obligated Mandatorily Redeemable Preferred Securities of Subsidiary Holding Solely Company Convertible Debentures. The trust is a variable interest entity under FIN 46 because the Company has a limited ability to make decisions about its
activities. However, the Company is not the primary beneficiary of the trust, and therefore, the trust and the mandatorily redeemable preferred securities issued by the trust are no longer reported on the Companys balance sheet. Instead, the
convertible subordinated debentures held by the trust which previously were eliminated in the Companys consolidated financial statements are reported on its balance sheet. Distributions on the mandatorily redeemable preferred securities are no
longer reported on the Companys statements of operations, but interest on the debentures is recorded as interest expense. These reclassifications are reflected for all periods presented and have no overall effect on the Companys results
of operations or financial position.





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##### Table of Contents

WORKING CAPITAL



Working capital totaled $380.2 million at February 29, 2004 and $211.6 million at May 31, 2003.



Receivables consist of:



|                               |  |          |         |     |   |       
|------------------------------ |  | -------- | ------- | --- | - | ------
|In thousands                   |  | February |         | May
|                               |  |         
|Accounts receivablenet        |  | $        | 191,002 |     | $ | 56,952
|Notes and interest receivables |  |          | 3,384   |     |   | 2,897 
|Tax refunds claims             |  |          | 1,982   |     |   | 1,982 
|                               |  |          |         |     |   |       
|                               |  | $        | 196,368 |     | $ | 61,831
|                               |  |          |         |     |   |       



Accounts receivable
are presented net of allowances for doubtful receivables of $5.6 million at February and $4.4 million at May. Provisions for bad debts charged to expense in the nine-month periods ended February 29, 2004 and February 28, 2003 were $4.1 million and
$2.0 million, respectively. Uncollectible accounts written off in the nine-month periods ended February 29, 2004 and February 28, 2003 were $2.9 million and $1.9 million, respectively.



The Company had an agreement to sell, on a revolving basis, an interest in a defined pool of trade receivables of up to $125
million. The interest sold totaled $115.5 million at May 31, 2003. On June 6, 2003, the Company entered into an agreement whereby the entire outstanding interest in the defined pool of trade receivables previously sold was repurchased and the
agreement to sell receivables was terminated. The repurchase was reflected as an increase in accounts receivable and reduction in operating cash flows.



Inventories consist of:



|                           |  |          |         |     |   |        
|-------------------------- |  | -------- | ------- | --- | - | -------
|In thousands               |  | February |         | May
|                           |  |         
|Finished products          |  | $        | 79,176  |     | $ | 83,713 
|Work in process            |  |          | 60,903  |     |   | 64,072 
|Raw materials and supplies |  |          | 121,890 |     |   | 122,988
|                           |  |          |         |     |   |        
|                           |  | $        | 261,969 |     | $ | 270,773
|                           |  |          |         |     |   |        



Inventories are stated
at cost (not in excess of market) primarily using the last-in, first-out method (LIFO). If the average cost method (which approximates current replacement cost) had been used, inventory values would have been higher by $24.9 million at February and
$16.5 million at May.



Accrued interest, wages and other items
consist of:



|                         |  |          |        |     |   |       
|------------------------ |  | -------- | ------ | --- | - | ------
|In thousands             |  | February |        | May
|                         |  |         
|Interest                 |  | $        | 13,182 |     | $ | 4,768 
|Employee compensation    |  |          | 21,885 |     |   | 18,258
|Income taxes             |  |          | 485    |     |   | 931   
|Property taxes and other |  |          | 21,779 |     |   | 19,419
|                         |  |          |        |     |   |       
|                         |  | $        | 57,331 |     | $ | 43,376
|                         |  |          |        |     |   |       



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##### Table of Contents

LONG-TERM DEBT



Long-term debt is comprised of the following:



|                                                                          |  |          |         |     |   |        
|------------------------------------------------------------------------- |  | -------- | ------- | --- | - | -------
|In thousands                                                              |  | February |         | May
|                                                                          |  |         
|Senior secured credit facility maturing in 2007                           |  | $        |        |     | $ |       
|Senior notes due in 2011, interest rate 10.25%                            |  |          | 600,000 |     |   |       
|Pollution control bonds due through 2007, interest rate 3% (75% of prime) |  |          | 3,515   |     |   | 3,855  
|Fair value of interest rate swaps                                         |  |          | 7,716   |     |   |       
|Refinanced debt                                                           |  |          |        |     |   | 473,500
|Other                                                                     |  |          | 409     |     |   | 522    
|                                                                          |  |          |         |     |   |        
|                                                                          |  |          | 611,640 |     |   | 477,877
|Less current maturities                                                   |  |          | 703     |     |   | 732    
|                                                                          |  |          |         |     |   |        
|                                                                          |  | $        | 610,937 |     | $ | 477,145
|                                                                          |  |          |         |     |   |        



On June 6, 2003, the
Company issued $600 million of 10.25% senior notes maturing June 15, 2011. The net proceeds were used to repay $473.5 million of the outstanding debt at May 31, 2003. The remaining proceeds were applied toward the cost of the Companys
agreement whereby the entire outstanding interest in the defined pool of trade receivables previously sold was repurchased and the agreement to sell receivables was terminated. The Company recognized an ordinary loss on early retirement of debt of
$11.2 million, representing $8.5 million in premium or consent payments to holders of the existing senior notes and a write-off of $2.7 million of debt issuance costs associated with the debt repaid.



The new senior notes represent general unsecured senior obligations of the
Company. The new senior notes were issued by Texas Industries, Inc. (the parent company), which has no independent assets or operations, excluding amounts related to its investments in its subsidiaries and financing activities. All consolidated
subsidiaries of the Company are 100% owned and excluding minor subsidiaries without operations or material assets, have provided a joint and several, full and unconditional guarantee of the securities. The terms of the notes contain covenants that
among other things provide for restrictions on the payment of dividends or repurchasing common stock, making certain investments, incurring additional debt or selling preferred stock, creating liens, and transferring assets. The Company is also
required to reinvest through capital expenditures the net proceeds from asset sales within 360 days of their receipt. To the extent that the amount not reinvested exceeds $10 million, the Company must make an offer to all note holders to purchase
the maximum principal amount of notes that may be purchased out of the remaining proceeds at an offer price equal to 100% of principal amount plus accrued and unpaid interest and liquidated damages, if any, to the date of purchase. At February 29,
2004, the Company had a requirement to reinvest through capital expenditures $30.4 million over the next 360 days. These capital expenditures may be funded, if necessary, from borrowings under the Companys long-term senior secured credit
facility. At any time prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of the notes at a redemption price of 110.25% of the principal amount thereof, plus accrued interest, with the net cash proceeds from
certain equity offerings. In addition, at any time on or prior to June 15, 2007, the Company may redeem all or part of the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium.
After June 15, 2007, the Company may redeem all or a part of the notes at a redemption price of 105.125% in 2007, 102.563% in 2008 and 100% in 2009 and thereafter.



In addition, the Company entered into a new senior secured credit facility, which provides up to $200 million of available
borrowings, subject to a borrowing base. The facility matures in June 2007, with borrowings limited based on the net amounts of eligible accounts receivable and inventory. Borrowings bear annual interest at either the LIBOR based rate plus 2.75% or
the prime rate plus .75%. These interest rate margins are subject to performance price adjustments. Commitment fees at an annual rate of .375% are to be paid on the unused portion of the facility. The Company may terminate the facility at any time,
and under certain circumstances may be required to pay a termination fee.



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##### Table of Contents

LONG-TERM DEBT-Continued



The senior secured credit facility is collateralized by first priority liens on substantially all of the Companys
existing and future acquired accounts receivable, inventory, deposit accounts and certain of its general intangibles. The agreement contains covenants restricting, among other things, prepayment or redemption of notes, distributions, dividends and
repurchases of capital stock and other equity interests, acquisitions and investments, indebtedness, liens and affiliate transactions. In addition, there is the requirement to meet certain financial tests and to maintain certain financial ratios if
the excess availability under the senior secured credit facility falls below $30 million, including maintaining a fixed charge coverage ratio and meeting a minimum tangible net worth test.



No borrowings were outstanding under the senior secured credit facility at
February 29, 2004, however, $22.6 million of the facility was utilized to support letters of credit.



The Companys ability to incur additional debt is currently limited to borrowings available under the senior secured credit facility. The payment of
cash dividends on common stock is currently limited to an annual amount of $7.0 million.



Annual maturities of long-term debt for each of the five succeeding years are $700,000, $700,000, $700,000, $1.5 million, and none.



The Company entered into interest rate swap agreements that have the economic effect of modifying the interest obligations
associated with $200 million and $100 million of the senior notes, effective August 5, 2003 and January 30, 2004, respectively, such that the interest payable on the senior notes effectively becomes variable based on six month LIBOR, set on June
15thand December 15thof each year. The interest rate swaps have been designated as fair value hedges and have no ineffective portion. The notional amounts and the termination dates match the principal amounts and
maturities of the $300 million portion of the outstanding senior notes. As a result of the interest rate swaps, the current effective interest rate on the hedged portion of the senior notes was reduced to 6.92%.



The amount of interest paid in the nine-month periods ended February 29, 2004
and February 28, 2003 was $46.5 million and $28.7 million, respectively.



CONVERTIBLE SUBORDINATED DEBENTURES



On June 5, 1998, the Company issued $206.2 million aggregate principal amount of 5.5% convertible subordinated debentures due June 30, 2028 (the Debentures). TXI Capital Trust I (the Trust), a Delaware business trust
100% owned by the Company, issued 4,000,000 of its 5.5% Shared Preference Redeemable Securities (Preferred Securities) to the public for gross proceeds of $200 million. The combined proceeds from the issuance of the Preferred Securities
and the issuance to the Company of the common securities of the Trust were invested by the Trust in the Debentures. At February 29, 2004, 3,998,744 Preferred Securities representing an undivided beneficial interest in $199.9 million of the $206.1
million aggregate principal amount of Debentures issued were outstanding.



The Debentures are redeemable for cash, at par, plus accrued and unpaid interest, under certain circumstances relating to federal income tax matters or in whole or in part at the option of the Company. Upon any
redemption of the Debentures, a like aggregate liquidation amount of Preferred Securities will be redeemed. Debentures are convertible at any time prior to the close of business on June 30, 2028, at the option of the holder of the Preferred
Securities into shares of the Companys common stock at a conversion rate of .72218 shares of the Companys common stock for each Preferred Security.



Holders of the Preferred Securities are entitled to receive cumulative cash distributions at an annual rate of $2.75 per Preferred Security (equivalent
to a rate of 5.5% per annum of the stated liquidation amount of $50 per Preferred Security). The Company has guaranteed, on a subordinated basis, distributions and other payments due on the Preferred Securities, to the extent the Trust has funds
available therefor and subject to certain other limitations (the Guarantee). The Guarantee, when taken together with the obligations of the Company under the Debentures, the Indenture pursuant to which the Debentures were issued, and the
Amended and Restated Trust Agreement of the Trust (including its obligations to pay costs, fees, expenses, debts and other obligations of the Trust [other than with respect to the Preferred Securities and the common securities of the Trust]),
provide a full and unconditional guarantee of amounts due on the Preferred Securities. The Preferred Securities do not have a stated maturity date, although they are subject to mandatory redemption upon maturity of the Debentures on June 30, 2028,
or upon earlier redemption.



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##### Table of Contents

SHAREHOLDERS EQUITY



Common stock consists of:



|                                            |  |          |  |       
|------------------------------------------- |  | -------- |  | ------
|In thousands                                |  | February |  | May   
|                                            |  |         
|Shares authorized                           |  | 40,000   |  | 40,000
|Shares outstanding at end of period         |  | 21,162   |  | 21,061
|Shares held in treasury                     |  | 3,905    |  | 4,006 
|Shares reserved for stock options and other |  | 3,239    |  | 3,405 



There are authorized
100,000 shares of Cumulative Preferred Stock, no par value, of which 20,000 shares are designated $5 Cumulative Preferred Stock (Voting), redeemable at $105 per share and entitled to $100 per share upon dissolution. An additional 25,000 shares are
designated Series B Junior Participating Preferred Stock. The Series B Preferred Stock is not redeemable and ranks, with respect to the payment of dividends and the distribution of assets, junior to (i) all other series of the Preferred Stock unless
the terms of any other series shall provide otherwise and (ii) the $5 Cumulative Preferred Stock. Pursuant to a Rights Agreement, in November 1996, the Company distributed a dividend of one preferred share purchase right for each outstanding share
of the Companys common stock. Each right entitles the holder to purchase from the Company one two-thousandth of a share of the Series B Junior Participating Preferred Stock at a price of $122.50, subject to adjustment. The rights will expire
on November 1, 2006 unless the date is extended or the rights are earlier redeemed or exchanged by the Company pursuant to the Rights Agreement.



STOCK OPTION PLAN



The Companys stock option plan as approved by shareholders expired July 14, 2003. The plan provided that non-qualified and incentive stock options
to purchase common stock could be granted to directors, officers and key employees at market prices at date of grant. Outstanding options became exercisable in installments beginning one year after date of grant and expire ten years later.



A summary of option transactions for the nine-month period
ended February 29, 2004, follows:



|                           |  |                     |   |  |                               |      
|-------------------------- |  | ------------------- | - |  | ----------------------------- | -----
|                           |  | Shares Under Option |   |  | Weighted Average Option Price
|                           |  |                    
|Outstanding at June 1      |  | 3,305,423           |   |  | $                             | 28.59
|Exercised                  |  | (108,640            | ) |  |                               | 19.67
|Cancelled                  |  | (37,190             | ) |  |                               | 33.19
|                           |  |                     |   |  |                               |      
|Outstanding at February 29 |  | 3,159,593           |   |  | $                             | 28.84
|                           |  |                     |   |  |                               |      



At February 29, 2004,
there were 1,958,913 shares exercisable. Outstanding options expire on various dates to May 15, 2013.



INCOME TAXES



Federal income taxes for the interim periods ended February 29, 2004 and February 28, 2003, have been included in the accompanying financial statements on
the basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax deductible and state income tax expense. Applying these differences to the estimated
current year pre-tax income resulted in an estimated annualized effective tax rate for 2004 of 26.2% compared to 43.9% for 2003. The tax benefit attributed to cumulative effect of accounting change is based on the incremental tax rate of 35%. The
Company made income tax payments of $1.3 million and $2.6 million in the nine-month periods ended February 29, 2004 and February 23, 2003, respectively.



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LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES



The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions, furnace dust disposal and wastewater discharge. The Company believes it is in substantial compliance with applicable environmental laws and regulations. However, from time to time the
Company receives claims from federal and state environmental regulatory agencies and entities asserting that the Company is or may be in violation of certain environmental laws and regulations. Based on its experience and the information currently
available to it, the Company believes that such claims will not have a material impact on its financial condition or results of operations. Despite the Companys compliance and experience, it is possible that the Company could be held liable
for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by the
Company.



The Company and subsidiaries are defendants in
lawsuits which arose in the normal course of business. In managements judgment (based on the opinion of counsel) the ultimate liability, if any, from such legal proceedings will not have a material effect on the consolidated financial position
or results of operations of the Company.



BUSINESS SEGMENTS



The Company has two reportable
segments: cement, aggregate and concrete products (the CAC segment) and steel (the Steel segment). The Companys reportable segments are strategic business units that offer different products and services. They are
managed separately because of significant differences in manufacturing processes, distribution and markets served. Through the CAC segment the Company produces and sells cement, stone, sand and gravel, expanded shale and clay aggregate, and concrete
products. Through the Steel segment, the Company produces and sells structural steel, piling products, specialty bar products, merchant bar-quality rounds, reinforcing bar and channels. Operating profit is net sales less operating costs and
expenses, excluding general corporate expenses and interest expense. Operating results and certain other financial data for the Companys business segments are presented on pages 25 and 26 under Business Segments of
Managements Discussion and Analysis of Financial Condition and Results of Operations, and are incorporated herein by reference.



CONDENSED CONSOLIDATING FINANCIAL INFORMATION



The Companys new senior notes were issued by Texas Industries, Inc. (the parent company), which has no independent assets or operations,
excluding amounts related to its investments in its subsidiaries and financing activities. All consolidated subsidiaries of the Company are 100% owned and excluding the Companys accounts receivable subsidiary and other minor subsidiaries
without operations or material assets, have provided a joint and several, full and unconditional guarantee of the securities. There are no significant restrictions on the parent companys ability to obtain funds from any of the guarantor
subsidiaries in the form of a dividend or loan. Additionally, there are no significant restrictions on the various guarantor subsidiaries ability to obtain funds from its direct or indirect subsidiaries.



The Companys accounts receivable subsidiary was established in March
1999 to facilitate the Companys agreement to sell, on a revolving basis, an undivided interest in a defined pool of trade receivables. At May 31, 2003, the subsidiary had total assets of $54.1 million. However, on June 6, 2003, in connection
with the issuance of the new senior notes, the Company entered into an agreement whereby the entire outstanding interest in the defined pool of trade receivables previously sold was repurchased and the agreement to sell trade receivables was
terminated. The repurchased trade receivables were subsequently transferred to the respective operating entities. Therefore, the financial balances of the accounts receivables of the accounts receivable subsidiary were eliminated at that time, and
no future activity is anticipated in this subsidiary.



The
following financial information presents condensed consolidating balance sheets, statements of operations and statements of cash flows for the parent company, all guarantor subsidiaries, and all non-guarantor subsidiaries. The information has been
presented as if the parent company accounted for its ownership of the guarantor and non-guarantor subsidiaries using the equity method of accounting.



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(Unaudited)

Condensed Consolidating Balance Sheets

Texas Industries, Inc. and Subsidiaries

February 29, 2004



|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|--------------------------------------- |  | -------------------- | --------- | --------------------- | - | --------- | -------------------------- |  | ------------------ | - |  | ------------ | ---------- | - |  | - | ---------
|In thousands                            |  | TexasIndustries,Inc. |           | GuarantorSubsidiaries |   |           | Non- GuarantorSubsidiaries |  | EliminatingEntries |   |  | Consolidated
|                                        |  |                      |           |                       |  
|Assets                                  |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|Current Assets                          |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|Cash                                    |  | $                    | 62,249    |                       | $ | (5,447    | )                          |  | $                  |  |  | $            |           |   |  | $ | 56,802   
|Receivablesnet                         |  |                      | 1,982     |                       |   | 194,386   |                            |  |                    |  |  |              |           |   |  |   | 196,368  
|Inventories                             |  |                      |          |                       |   | 261,969   |                            |  |                    |  |  |              |           |   |  |   | 261,969  
|Deferred taxes and prepaid expenses     |  |                      | 60        |                       |   | 33,003    |                            |  |                    |  |  |              |           |   |  |   | 33,063   
|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|Total Current Assets                    |  |                      | 64,291    |                       |   | 483,911   |                            |  |                    |  |  |              |           |   |  |   | 548,202  
|                                        |  |                      |           |                       |  
|Other Assets                            |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|Goodwill                                |  |                      |          |                       |   | 146,474   |                            |  |                    |  |  |              |           |   |  |   | 146,474  
|Real estate and investments             |  |                      |          |                       |   | 48,880    |                            |  |                    |  |  |              |           |   |  |   | 48,880   
|Deferred charges and intangibles        |  |                      | 29,066    |                       |   | 11,879    |                            |  |                    |  |  |              |           |   |  |   | 40,945   
|Deferred income taxes                   |  |                      | 36,413    |                       |   |          |                            |  |                    |  |  |              | (36,413    | ) |  |   |         
|Investment in subsidiaries              |  |                      | 1,067,622 |                       |   |          |                            |  |                    |  |  |              | (1,067,622 | ) |  |   |         
|Intercompany receivables                |  |                      | 759,860   |                       |   | 399,078   |                            |  |                    |  |  |              | (1,158,938 | ) |  |   |         
|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|                                        |  |                      | 1,892,961 |                       |   | 606,311   |                            |  |                    |  |  |              | (2,262,973 | ) |  |   | 236,299  
|                                        |  |                      |           |                       |  
|Property, Plant and Equipment           |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|Land and land improvements              |  |                      |          |                       |   | 227,940   |                            |  |                    |  |  |              | (508       | ) |  |   | 227,432  
|Buildings                               |  |                      |          |                       |   | 99,944    |                            |  |                    |  |  |              |           |   |  |   | 99,944   
|Machinery and equipment                 |  |                      |          |                       |   | 1,712,577 |                            |  |                    |  |  |              | (805       | ) |  |   | 1,711,772
|Construction in progress                |  |                      |          |                       |   | 44,977    |                            |  |                    |  |  |              |           |   |  |   | 44,977   
|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|                                        |  |                      |          |                       |   | 2,085,438 |                            |  |                    |  |  |              | (1,313     | ) |  |   | 2,084,125
|Less allowances for depreciation        |  |                      |          |                       |   | 997,071   |                            |  |                    |  |  |              | (805       | ) |  |   | 996,266  
|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|                                        |  |                      |          |                       |   | 1,088,367 |                            |  |                    |  |  |              | (508       | ) |  |   | 1,087,859
|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|                                        |  | $                    | 1,957,252 |                       | $ | 2,178,589 |                            |  | $                  |  |  | $            | (2,263,481 | ) |  | $ | 1,872,360
|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|                                        |  |                      |           |                       |  
|Liabilities and Shareholders Equity    |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|Current Liabilities                     |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|Trade accounts payable                  |  | $                    | 36        |                       | $ | 109,936   |                            |  | $                  |  |  | $            |           |   |  | $ | 109,972  
|Accrued interest, wages and other items |  |                      | 15,948    |                       |   | 41,383    |                            |  |                    |  |  |              |           |   |  |   | 57,331   
|Current portion of long-term debt       |  |                      | 680       |                       |   | 23        |                            |  |                    |  |  |              |           |   |  |   | 703      
|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|Total Current Liabilities               |  |                      | 16,664    |                       |   | 151,342   |                            |  |                    |  |  |              |           |   |  |   | 168,006  
|                                        |  |                      |           |                       |  
|Intercompany Payables                   |  |                      | 399,078   |                       |   | 759,860   |                            |  |                    |  |  |              | (1,158,938 | ) |  |   |         
|                                        |  |                      |           |                       |  
|Long-Term Debt                          |  |                      | 610,551   |                       |   | 386       |                            |  |                    |  |  |              |           |   |  |   | 610,937  
|                                        |  |                      |           |                       |  
|Convertible Subordinated Debentures     |  |                      | 199,937   |                       |   |           |                            |  |                    |   |  |              |            |   |  |   | 199,937  
|                                        |  |                      |           |                       |  
|Deferred Income Taxes and Other Credits |  |                      | 1,521     |                       |   | 204,917   |                            |  |                    |  |  |              | (36,567    | ) |  |   | 169,871  
|                                        |  |                      |           |                       |  
|Shareholders Equity                    |  |                      | 729,501   |                       |   | 1,062,084 |                            |  |                    |  |  |              | (1,067,976 | ) |  |   | 723,609  
|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          
|                                        |  | $                    | 1,957,252 |                       | $ | 2,178,589 |                            |  | $                  |  |  | $            | (2,263,481 | ) |  | $ | 1,872,360
|                                        |  |                      |           |                       |   |           |                            |  |                    |   |  |              |            |   |  |   |          





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##### Table of Contents

Condensed Consolidating Balance Sheets

Texas Industries, Inc. and Subsidiaries

May 31, 2003



|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|--------------------------------------- |  | -------------------- | --------- | --------------------- | - | -------------------------- |  | ------------------ | ------ |  | ------------ | ---------- | - |  | - | ---------
|In thousands                            |  | TexasIndustries,Inc. |           | GuarantorSubsidiaries |   | Non- GuarantorSubsidiaries |  | EliminatingEntries |        |  | Consolidated
|                                        |  |                      |           |                       |  
|Assets                                  |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|Current Assets                          |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|Cash                                    |  | $                    | 4,161     |                       | $ | 2,038                      |  | $                  | 5      |  | $            |           |   |  | $ | 6,204    
|Receivablesnet                         |  |                      | 1,982     |                       |   | 5,581                      |  |                    | 54,076 |  |              | 192        |   |  |   | 61,831   
|Inventories                             |  |                      |          |                       |   | 270,773                    |  |                    |       |  |              |           |   |  |   | 270,773  
|Deferred taxes and prepaid expenses     |  |                      | 54        |                       |   | 37,235                     |  |                    |       |  |              | 86         |   |  |   | 37,375   
|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|Total Current Assets                    |  |                      | 6,197     |                       |   | 315,627                    |  |                    | 54,081 |  |              | 278        |   |  |   | 376,183  
|                                        |  |                      |           |                       |  
|Other Assets                            |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|Goodwill                                |  |                      |          |                       |   | 146,474                    |  |                    |       |  |              |           |   |  |   | 146,474  
|Real estate and investments             |  |                      |          |                       |   | 43,600                     |  |                    |       |  |              |           |   |  |   | 43,600   
|Deferred charges and intangibles        |  |                      | 9,782     |                       |   | 14,203                     |  |                    |       |  |              |           |   |  |   | 23,985   
|Deferred income taxes                   |  |                      | 32,491    |                       |   |                           |  |                    |       |  |              | (32,491    | ) |  |   |         
|Investment in subsidiaries              |  |                      | 1,081,610 |                       |   |                           |  |                    |       |  |              | (1,081,610 | ) |  |   |         
|Intercompany receivables                |  |                      | 780,095   |                       |   | 493,393                    |  |                    |       |  |              | (1,273,488 | ) |  |   |         
|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|                                        |  |                      | 1,903,978 |                       |   | 697,670                    |  |                    |       |  |              | (2,387,589 | ) |  |   | 214,059  
|                                        |  |                      |           |                       |  
|Property, Plant and Equipment           |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|Land and land improvements              |  |                      |          |                       |   | 219,195                    |  |                    |       |  |              | (508       | ) |  |   | 218,687  
|Buildings                               |  |                      |          |                       |   | 101,490                    |  |                    |       |  |              |           |   |  |   | 101,490  
|Machinery and equipment                 |  |                      |          |                       |   | 1,713,090                  |  |                    |       |  |              | (805       | ) |  |   | 1,712,285
|Construction in progress                |  |                      |          |                       |   | 47,724                     |  |                    |       |  |              |           |   |  |   | 47,724   
|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|                                        |  |                      |          |                       |   | 2,081,499                  |  |                    |       |  |              | (1,313     | ) |  |   | 2,080,186
|Less allowances for depreciation        |  |                      |          |                       |   | 941,623                    |  |                    |       |  |              | (805       | ) |  |   | 940,818  
|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|                                        |  |                      |          |                       |   | 1,139,876                  |  |                    |       |  |              | (508       | ) |  |   | 1,139,368
|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|                                        |  | $                    | 1,910,175 |                       | $ | 2,153,173                  |  | $                  | 54,081 |  | $            | (2,387,819 | ) |  | $ | 1,729,610
|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|                                        |  |                      |           |                       |  
|Liabilities and Shareholders Equity    |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|Current Liabilities                     |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|Trade accounts payable                  |  | $                    | 57        |                       | $ | 120,420                    |  | $                  |       |  | $            |           |   |  | $ | 120,477  
|Accrued interest, wages and other items |  |                      | 4,435     |                       |   | 38,748                     |  |                    | 193    |  |              |           |   |  |   | 43,376   
|Current portion of long-term debt       |  |                      | 680       |                       |   | 52                         |  |                    |       |  |              |           |   |  |   | 732      
|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|Total Current Liabilities               |  |                      | 5,172     |                       |   | 159,220                    |  |                    | 193    |  |              |           |   |  |   | 164,585  
|                                        |  |                      |           |                       |  
|Intercompany Payables                   |  |                      | 493,393   |                       |   | 727,707                    |  |                    | 52,388 |  |              | (1,273,488 | ) |  |   |         
|                                        |  |                      |           |                       |  
|Long-Term Debt                          |  |                      | 476,675   |                       |   | 470                        |  |                    |       |  |              |           |   |  |   | 477,145  
|                                        |  |                      |           |                       |  
|Convertible Subordinated Debentures     |  |                      | 199,937   |                       |   |                            |  |                    |        |  |              |            |   |  |   | 199,937  
|                                        |  |                      |           |                       |  
|Deferred Income Taxes and Other Credits |  |                      | 1,597     |                       |   | 191,328                    |  |                    |       |  |              | (32,491    | ) |  |   | 160,434  
|                                        |  |                      |           |                       |  
|Shareholders Equity                    |  |                      | 733,401   |                       |   | 1,074,448                  |  |                    | 1,500  |  |              | (1,081,840 | ) |  |   | 727,509  
|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          
|                                        |  | $                    | 1,910,175 |                       | $ | 2,153,173                  |  | $                  | 54,081 |  | $            | (2,387,819 | ) |  | $ | 1,729,610
|                                        |  |                      |           |                       |   |                            |  |                    |        |  |              |            |   |  |   |          





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##### Table of Contents

(Unaudited)

Condensed Consolidating Statements of Operations

Texas Industries, Inc. and Subsidiaries

Three Months Ended February 29, 2004



|                                                            |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |        |   |  |   |         |  
|----------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | ------------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|In thousands                                                |  | TexasIndustries,Inc. |         |   | GuarantorSubsidiaries |   |         | Non- GuarantorSubsidiaries |  | EliminatingEntries |   |  | Consolidated |       
|                                                            |  |                      |         |   |                      
|Net Sales                                                   |  | $                    |        |   |                       | $ | 407,970 |                            |  | $                  |  |  | $            |       |   |  | $ | 407,970 |  
|                                                            |  |                      |         |   |                      
|Costs and Expenses (Income)                                 |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |        |   |  |   |         |  
|Cost of products sold                                       |  |                      |        |   |                       |   | 368,746 |                            |  |                    |  |  |              |       |   |  |   | 368,746 |  
|Selling, general and administrative                         |  |                      | 982     |   |                       |   | 21,895  |                            |  |                    |  |  |              |       |   |  |   | 22,877  |  
|Interest                                                    |  |                      | 17,136  |   |                       |   | 1,688   |                            |  |                    |  |  |              | (863   | ) |  |   | 17,961  |  
|Loss on early retirement of debt                            |  |                      |        |   |                       |   |        |                            |  |                    |  |  |              |       |   |  |   |        |  
|Other income                                                |  |                      | (35,317 | ) |                       |   | (2,147  | )                          |  |                    |  |  |              | 863    |   |  |   | (36,601 | )
|                                                            |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |        |   |  |   |         |  
|                                                            |  |                      | (17,199 | ) |                       |   | 390,182 |                            |  |                    |  |  |              |       |   |  |   | 372,983 |  
|                                                            |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |        |   |  |   |         |  
|Income (Loss) Before the Following Items                    |  |                      | 17,199  |   |                       |   | 17,788  |                            |  |                    |  |  |              |       |   |  |   | 34,987  |  
|                                                            |  |                      |         |   |                      
|Income taxes (benefit)                                      |  |                      | 6,020   |   |                       |   | 8,078   |                            |  |                    |  |  |              |       |   |  |   | 14,098  |  
|                                                            |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |        |   |  |   |         |  
|Income (Loss) Before Cumulative Effect of Accounting Change |  |                      | 11,179  |   |                       |   | 9,710   |                            |  |                    |  |  |              |       |   |  |   | 20,889  |  
|                                                            |  |                      |         |   |                      
|Cumulative effect of accounting changenet of tax           |  |                      |        |   |                       |   |        |                            |  |                    |  |  |              |       |   |  |   |        |  
|                                                            |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |        |   |  |   |         |  
|                                                            |  |                      | 11,179  |   |                       |   | 9,710   |                            |  |                    |  |  |              |       |   |  |   | 20,889  |  
|                                                            |  |                      |         |   |                      
|Equity in earnings of subsidiaries                          |  |                      | 9,710   |   |                       |   |        |                            |  |                    |  |  |              | (9,710 | ) |  |   |        |  
|                                                            |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |        |   |  |   |         |  
|Net Income (Loss)                                           |  | $                    | 20,889  |   |                       | $ | 9,710   |                            |  | $                  |  |  | $            | (9,710 | ) |  | $ | 20,889  |  
|                                                            |  |                      |         |   |                       |   |         |                            |  |                    |   |  |              |        |   |  |   |         |  





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##### Table of Contents

(Unaudited)

Condensed Consolidating Statements of Operations

Texas Industries, Inc. and Subsidiaries

Three Months Ended February 28, 2003



|                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |        |   |  |   |         |  
|----------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------- | -------------------------- |  | - | ------------------ | - |  | ------------ | ------ | - |  | - | ------- | -
|In thousands                                                |  | TexasIndustries,Inc. |         |   | GuarantorSubsidiaries |   |         | Non- GuarantorSubsidiaries |  |   | EliminatingEntries |   |  | Consolidated |       
|                                                            |  |                      |         |   |                      
|Net Sales                                                   |  | $                    |        |   |                       | $ | 296,411 |                            |  | $ |                   |   |  | $            |       |   |  | $ | 296,411 |  
|                                                            |  |                      |         |   |                      
|Costs and Expenses (Income)                                 |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |        |   |  |   |         |  
|Cost of products sold                                       |  |                      |        |   |                       |   | 288,172 |                            |  |   |                   |   |  |              | (3     | ) |  |   | 288,169 |  
|Selling, general and administrative                         |  |                      | 1,794   |   |                       |   | 20,965  |                            |  |   | 635                |   |  |              |       |   |  |   | 23,394  |  
|Interest                                                    |  |                      | 13,301  |   |                       |   | 1,793   |                            |  |   | 305                |   |  |              | (4,168 | ) |  |   | 11,231  |  
|Loss on early retirement of debt                            |  |                      |        |   |                       |   |        |                            |  |   |                   |   |  |              |       |   |  |   |        |  
|Other income                                                |  |                      | (1,709  | ) |                       |   | (1,981  | )                          |  |   | (941               | ) |  |              | 4,184  |   |  |   | (447    | )
|                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |        |   |  |   |         |  
|                                                            |  |                      | 13,386  |   |                       |   | 308,949 |                            |  |   | (1                 | ) |  |              | 13     |   |  |   | 322,347 |  
|                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |        |   |  |   |         |  
|Income (Loss) Before the Following Items                    |  |                      | (13,386 | ) |                       |   | (12,538 | )                          |  |   | 1                  |   |  |              | (13    | ) |  |   | (25,936 | )
|                                                            |  |                      |         |   |                      
|Income taxes (benefit)                                      |  |                      | (4,685  | ) |                       |   | (4,029  | )                          |  |   | 1                  |   |  |              | (5     | ) |  |   | (8,718  | )
|                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |        |   |  |   |         |  
|Income (Loss) Before Cumulative Effect of Accounting Change |  |                      | (8,701  | ) |                       |   | (8,509  | )                          |  |   |                   |   |  |              | (8     | ) |  |   | (17,218 | )
|                                                            |  |                      |         |   |                      
|Cumulative effect of accounting changenet of tax           |  |                      |        |   |                       |   |        |                            |  |   |                   |   |  |              |       |   |  |   |        |  
|                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |        |   |  |   |         |  
|                                                            |  |                      | (8,701  | ) |                       |   | (8,509  | )                          |  |   |                   |   |  |              | (8     | ) |  |   | (17,218 | )
|                                                            |  |                      |         |   |                      
|Equity in earnings of subsidiaries                          |  |                      | (8,517  | ) |                       |   |        |                            |  |   |                   |   |  |              | 8,517  |   |  |   |        |  
|                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |        |   |  |   |         |  
|Net Income (Loss)                                           |  | $                    | (17,218 | ) |                       | $ | (8,509  | )                          |  | $ |                   |   |  | $            | 8,509  |   |  | $ | (17,218 | )
|                                                            |  |                      |         |   |                       |   |         |                            |  |   |                    |   |  |              |        |   |  |   |         |  





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##### Table of Contents

(Unaudited)

Condensed Consolidating Statements of Operations

Texas Industries, Inc. and Subsidiaries

Nine Months Ended February 29, 2004



|                                                            |  |                      |         |   |                       |   |           |                            |  |   |                    |   |  |              |         |   |  |   |           |  
|----------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | --------- | -------------------------- |  | - | ------------------ | - |  | ------------ | ------- | - |  | - | --------- | -
|In thousands                                                |  | TexasIndustries,Inc. |         |   | GuarantorSubsidiaries |   |           | Non- GuarantorSubsidiaries |  |   | EliminatingEntries |   |  | Consolidated |        
|                                                            |  |                      |         |   |                      
|Net Sales                                                   |  | $                    |        |   |                       | $ | 1,152,567 |                            |  | $ |                   |   |  | $            |        |   |  | $ | 1,152,567 |  
|                                                            |  |                      |         |   |                      
|Costs and Expenses (Income)                                 |  |                      |         |   |                       |   |           |                            |  |   |                    |   |  |              |         |   |  |   |           |  
|Cost of products sold                                       |  |                      |        |   |                       |   | 1,055,250 |                            |  |   |                   |   |  |              |        |   |  |   | 1,055,250 |  
|Selling, general and administrative                         |  |                      | 2,880   |   |                       |   | 70,236    |                            |  |   | 36                 |   |  |              |        |   |  |   | 73,152    |  
|Interest                                                    |  |                      | 53,505  |   |                       |   | 5,195     |                            |  |   | 31                 |   |  |              | (2,847  | ) |  |   | 55,884    |  
|Loss on early retirement of debt                            |  |                      | 11,246  |   |                       |   |          |                            |  |   |                   |   |  |              |        |   |  |   | 11,246    |  
|Other income                                                |  |                      | (37,367 | ) |                       |   | (8,492    | )                          |  |   | (67                | ) |  |              | 3,039   |   |  |   | (42,887   | )
|                                                            |  |                      |         |   |                       |   |           |                            |  |   |                    |   |  |              |         |   |  |   |           |  
|                                                            |  |                      | 30,264  |   |                       |   | 1,122,189 |                            |  |   |                   |   |  |              | 192     |   |  |   | 1,152,645 |  
|                                                            |  |                      |         |   |                       |   |           |                            |  |   |                    |   |  |              |         |   |  |   |           |  
|Income (Loss) Before the Following Items Following Items    |  |                      | (30,264 | ) |                       |   | 30,378    |                            |  |   |                   |   |  |              | (192    | ) |  |   | (78       | )
|                                                            |  |                      |         |   |                      
|Income taxes (benefit)                                      |  |                      | (10,592 | ) |                       |   | 10,783    |                            |  |   |                   |   |  |              | (67     | ) |  |   | 124       |  
|                                                            |  |                      |         |   |                       |   |           |                            |  |   |                    |   |  |              |         |   |  |   |           |  
|Income (Loss) Before Cumulative Effect of Accounting Change |  |                      | (19,672 | ) |                       |   | 19,595    |                            |  |   |                   |   |  |              | (125    | ) |  |   | (202      | )
|                                                            |  |                      |         |   |                      
|Cumulative effect of accounting changenet of tax           |  |                      |        |   |                       |   | (1,071    | )                          |  |   |                   |   |  |              |        |   |  |   | (1,071    | )
|                                                            |  |                      |         |   |                       |   |           |                            |  |   |                    |   |  |              |         |   |  |   |           |  
|                                                            |  |                      | (19,672 | ) |                       |   | 18,524    |                            |  |   |                   |   |  |              | (125    | ) |  |   | (1,273    | )
|                                                            |  |                      |         |   |                      
|Equity in earnings of subsidiaries                          |  |                      | 18,399  |   |                       |   |          |                            |  |   |                   |   |  |              | (18,399 | ) |  |   |          |  
|                                                            |  |                      |         |   |                       |   |           |                            |  |   |                    |   |  |              |         |   |  |   |           |  
|Net Income (Loss)                                           |  | $                    | (1,273  | ) |                       | $ | 18,524    |                            |  | $ |                   |   |  | $            | (18,524 | ) |  | $ | (1,273    | )
|                                                            |  |                      |         |   |                       |   |           |                            |  |   |                    |   |  |              |         |   |  |   |           |  



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##### Table of Contents

(Unaudited)

Condensed Consolidating Statements of Operations

Texas Industries, Inc. and Subsidiaries

Nine Months Ended February 28, 2003



|                                                            |  |                        |         |   |                        |   |           |                             |  |   |                     |   |  |              |         |   |  |   |           |  
|----------------------------------------------------------- |  | ---------------------- | ------- | - | ---------------------- | - | --------- | --------------------------- |  | - | ------------------- | - |  | ------------ | ------- | - |  | - | --------- | -
|In thousands                                                |  | Texas Industries, Inc. |         |   | Guarantor Subsidiaries |   |           | Non- Guarantor Subsidiaries |  |   | Eliminating Entries |   |  | Consolidated |        
|Net Sales                                                   |  | $                      |        |   |                        | $ | 1,000,078 |                             |  | $ |                    |   |  | $            |        |   |  | $ | 1,000,078 |  
|                                                            |  |                        |         |   |                       
|Costs and Expenses (Income)                                 |  |                        |         |   |                        |   |           |                             |  |   |                     |   |  |              |         |   |  |   |           |  
|Cost of products sold                                       |  |                        |        |   |                        |   | 927,362   |                             |  |   |                    |   |  |              | (23     | ) |  |   | 927,339   |  
|Selling, general and administrative                         |  |                        | 1,993   |   |                        |   | 67,006    |                             |  |   | 2,228               |   |  |              |        |   |  |   | 71,227    |  
|Interest                                                    |  |                        | 40,989  |   |                        |   | 5,498     |                             |  |   | 1,186               |   |  |              | (13,552 | ) |  |   | 34,121    |  
|Loss on early retirement of debt                            |  |                        |        |   |                        |   |          |                             |  |   |                    |   |  |              |        |   |  |   |          |  
|Other income                                                |  |                        | (5,610  | ) |                        |   | (7,518    | )                           |  |   | (3,414              | ) |  |              | 13,589  |   |  |   | (2,953    | )
|                                                            |  |                        |         |   |                        |   |           |                             |  |   |                     |   |  |              |         |   |  |   |           |  
|                                                            |  |                        | 37,372  |   |                        |   | 992,348   |                             |  |   |                    |   |  |              | 14      |   |  |   | 1,029,734 |  
|                                                            |  |                        |         |   |                        |   |           |                             |  |   |                     |   |  |              |         |   |  |   |           |  
|Income (Loss) Before the Following Items                    |  |                        | (37,372 | ) |                        |   | 7,730     |                             |  |   |                    |   |  |              | (14     | ) |  |   | (29,656   | )
|                                                            |  |                        |         |   |                       
|Income taxes (benefit)                                      |  |                        | (13,080 | ) |                        |   | 72        |                             |  |   |                    |   |  |              | (5      | ) |  |   | (13,013   | )
|                                                            |  |                        |         |   |                        |   |           |                             |  |   |                     |   |  |              |         |   |  |   |           |  
|Income (Loss) Before Cumulative Effect of Accounting Change |  |                        | (24,292 | ) |                        |   | 7,658     |                             |  |   |                    |   |  |              | (9      | ) |  |   | (16,643   | )
|                                                            |  |                        |         |   |                       
|Cumulative effect of accounting changenet of tax           |  |                        |        |   |                        |   |          |                             |  |   |                    |   |  |              |        |   |  |   |          |  
|                                                            |  |                        |         |   |                        |   |           |                             |  |   |                     |   |  |              |         |   |  |   |           |  
|                                                            |  |                        | (24,292 | ) |                        |   | 7,658     |                             |  |   |                    |   |  |              | (9      | ) |  |   | (16,643   | )
|                                                            |  |                        |         |   |                       
|Equity in earnings of subsidiaries                          |  |                        | 7,649   |   |                        |   |          |                             |  |   |                    |   |  |              | (7,649  | ) |  |   |          |  
|                                                            |  |                        |         |   |                        |   |           |                             |  |   |                     |   |  |              |         |   |  |   |           |  
|Net Income (Loss)                                           |  | $                      | (16,643 | ) |                        | $ | 7,658     |                             |  | $ |                    |   |  | $            | (7,658  | ) |  | $ | (16,643   | )
|                                                            |  |                        |         |   |                        |   |           |                             |  |   |                     |   |  |              |         |   |  |   |           |  





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##### Table of Contents

(Unaudited)

Condensed Consolidating Statements of Cash Flows

Texas Industries, Inc. and Subsidiaries

Nine Months Ended February 29, 2004



|                                       |  |                        |          |   |                        |   |         |                             |  |   |                     |   |              |   |   |  |   |          |  
|-------------------------------------- |  | ---------------------- | -------- | - | ---------------------- | - | ------- | --------------------------- |  | - | ------------------- | - | ------------ | - | - |  | - | -------- | -
|In thousands                           |  | Texas Industries, Inc. |          |   | Guarantor Subsidiaries |   |         | Non- Guarantor Subsidiaries |  |   | Eliminating Entries |   | Consolidated |  
|Net Cash Provided (Used) by Operations |  | $                      | (77,431  | ) |                        | $ | 16,457  |                             |  | $ | (5                  | ) |              | $ |  |  | $ | (60,979  | )
|                                       |  |                        |          |   |                       
|Investing Activities                   |  |                        |          |   |                        |   |         |                             |  |   |                     |   |              |   |   |  |   |          |  
|Capital expenditures                   |  |                        |         |   |                        |   | (24,725 | )                           |  |   |                    |   |              |   |  |  |   | (24,725  | )
|Proceeds from disposal of assets       |  |                        | 37,566   |   |                        |   | 2,499   |                             |  |   |                    |   |              |   |  |  |   | 40,065   |  
|Othernet                              |  |                        |         |   |                        |   | (1,575  | )                           |  |   |                    |   |              |   |  |  |   | (1,575   | )
|                                       |  |                        |          |   |                        |   |         |                             |  |   |                     |   |              |   |   |  |   |          |  
|Net cash provided (used) by investing  |  |                        | 37,566   |   |                        |   | (23,801 | )                           |  |   |                    |   |              |   |  |  |   | 13,765   |  
|                                       |  |                        |          |   |                       
|Financing Activities                   |  |                        |          |   |                        |   |         |                             |  |   |                     |   |              |   |   |  |   |          |  
|Proceeds of long-term borrowing        |  |                        | 718,097  |   |                        |   |        |                             |  |   |                    |   |              |   |  |  |   | 718,097  |  
|Debt retirements                       |  |                        | (591,937 | ) |                        |   | (115    | )                           |  |   |                    |   |              |   |  |  |   | (592,052 | )
|Debt issuance costs                    |  |                        | (16,373  | ) |                        |   |        |                             |  |   |                    |   |              |   |  |  |   | (16,373  | )
|Debt retirement costs                  |  |                        | (8,505   | ) |                        |   |        |                             |  |   |                    |   |              |   |  |  |   | (8,505   | )
|Common dividends paid                  |  |                        | (4,748   | ) |                        |   |        |                             |  |   |                    |   |              |   |  |  |   | (4,748   | )
|Othernet                              |  |                        | 1,419    |   |                        |   | (26     | )                           |  |   |                    |   |              |   |  |  |   | 1,393    |  
|                                       |  |                        |          |   |                        |   |         |                             |  |   |                     |   |              |   |   |  |   |          |  
|Net cash provided (used) by financing  |  |                        | 97,953   |   |                        |   | (141    | )                           |  |   |                    |   |              |   |  |  |   | 97,812   |  
|                                       |  |                        |          |   |                        |   |         |                             |  |   |                     |   |              |   |   |  |   |          |  
|Increase (decrease) in cash            |  |                        | 58,088   |   |                        |   | (7,485  | )                           |  |   | (5                  | ) |              |   |  |  |   | 50,598   |  
|                                       |  |                        |          |   |                       
|Cash at beginning of period            |  |                        | 4,161    |   |                        |   | 2,038   |                             |  |   | 5                   |   |              |   |  |  |   | 6,204    |  
|                                       |  |                        |          |   |                        |   |         |                             |  |   |                     |   |              |   |   |  |   |          |  
|Cash at end of period                  |  | $                      | 62,249   |   |                        | $ | (5,447  | )                           |  | $ |                    |   |              | $ |  |  | $ | 56,802   |  
|                                       |  |                        |          |   |                        |   |         |                             |  |   |                     |   |              |   |   |  |   |          |  



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##### Table of Contents

(Unaudited)

Condensed Consolidating Statements of Cash Flows

Texas Industries, Inc. and Subsidiaries

Nine Months Ended February 28, 2003



|                                       |  |                        |          |   |                        |   |         |                             |  |                     |    |              |   |   |  |   |          |  
|-------------------------------------- |  | ---------------------- | -------- | - | ---------------------- | - | ------- | --------------------------- |  | ------------------- | -- | ------------ | - | - |  | - | -------- | -
|In thousands                           |  | Texas Industries, Inc. |          |   | Guarantor Subsidiaries |   |         | Non- Guarantor Subsidiaries |  | Eliminating Entries |    | Consolidated |  
|Net Cash Provided (Used) by Operations |  | $                      | 1,066    |   |                        | $ | 49,921  |                             |  | $                   | 10 |              | $ |  |  | $ | 50,997   |  
|                                       |  |                        |          |   |                       
|Investing Activities                   |  |                        |          |   |                        |   |         |                             |  |                     |    |              |   |   |  |   |          |  
|Capital expenditures                   |  |                        |         |   |                        |   | (41,094 | )                           |  |                     |   |              |   |  |  |   | (41,094  | )
|Proceeds from disposal of assets       |  |                        |         |   |                        |   | 10,974  |                             |  |                     |   |              |   |  |  |   | 10,974   |  
|Othernet                              |  |                        |         |   |                        |   | (683    | )                           |  |                     |   |              |   |  |  |   | (683     | )
|                                       |  |                        |          |   |                        |   |         |                             |  |                     |    |              |   |   |  |   |          |  
|Net cash provided (used) by investing  |  |                        |         |   |                        |   | (30,803 | )                           |  |                     |   |              |   |  |  |   | (30,803  | )
|                                       |  |                        |          |   |                       
|Financing Activities                   |  |                        |          |   |                        |   |         |                             |  |                     |    |              |   |   |  |   |          |  
|Proceeds of long-term borrowing        |  |                        | 221,940  |   |                        |   |        |                             |  |                     |   |              |   |  |  |   | 221,940  |  
|Debt retirements                       |  |                        | (235,780 | ) |                        |   | (2,635  | )                           |  |                     |   |              |   |  |  |   | (238,415 | )
|Debt issuance costs                    |  |                        |         |   |                        |   |        |                             |  |                     |   |              |   |  |  |   |         |  
|Debt retirement costs                  |  |                        |         |   |                        |   |        |                             |  |                     |   |              |   |  |  |   |         |  
|Common dividends paid                  |  |                        | (4,736   | ) |                        |   |        |                             |  |                     |   |              |   |  |  |   | (4,736   | )
|Othernet                              |  |                        | 508      |   |                        |   | (1,427  | )                           |  |                     |   |              |   |  |  |   | (919     | )
|                                       |  |                        |          |   |                        |   |         |                             |  |                     |    |              |   |   |  |   |          |  
|Net cash provided (used) by financing  |  |                        | (18,068  | ) |                        |   | (4,062  | )                           |  |                     |   |              |   |  |  |   | (22,130  | )
|                                       |  |                        |          |   |                        |   |         |                             |  |                     |    |              |   |   |  |   |          |  
|Increase (decrease) in cash            |  |                        | (17,002  | ) |                        |   | 15,056  |                             |  |                     | 10 |              |   |  |  |   | (1,936   | )
|                                       |  |                        |          |   |                       
|Cash at beginning of period            |  |                        | 17,026   |   |                        |   | (9,601  | )                           |  |                     | 5  |              |   |  |  |   | 7,430    |  
|                                       |  |                        |          |   |                        |   |         |                             |  |                     |    |              |   |   |  |   |          |  
|Cash at end of period                  |  | $                      | 24       |   |                        | $ | 5,455   |                             |  | $                   | 15 |              | $ |  |  | $ | 5,494    |  
|                                       |  |                        |          |   |                        |   |         |                             |  |                     |    |              |   |   |  |   |          |  





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EXHIBIT A



INDEPENDENT ACCOUNTANTS REVIEW REPORT



Board of Directors

Texas Industries, Inc.



We have reviewed the accompanying condensed consolidated balance sheet of Texas Industries,
Inc. and subsidiaries (the Company) as of February 29, 2004 and the related condensed consolidated statements of operations for the three and nine-month periods ended February 29, 2004 and February 28, 2003, and the condensed consolidated statements
of cash flows for the nine-month periods ended February 29, 2004 and February 28, 2003. These financial statements are the responsibility of the Companys management.



We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.



We have previously audited, in accordance with auditing standards generally accepted in the
United States, the consolidated balance sheet of Texas Industries, Inc. and subsidiaries as of May 31, 2003, and the related consolidated statements of operations, shareholders equity, and cash flows for the year then ended [not presented
herein] and in our report dated July 14, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2003, is
fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.



/s/    Ernst & Young LLP




March 24, 2004





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MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Comparison of operations and financial condition for the three-month and
nine-month periods ended February 29, 2004 to the three-month and nine-month periods ended February 28, 2003.



BUSINESS SEGMENTS



The Company is a leading supplier of construction materials through two business segments: cement, aggregate and concrete products (the CAC
segment); and structural steel and specialty bar products (the Steel segment). Through the CAC segment, the Company produces and sells cement, stone, sand and gravel, expanded shale and clay aggregate, and concrete products. Through the
Steel segment, the Company produces and sells structural steel, piling products, specialty bar products, merchant bar-quality rounds, reinforcing bar and channels.



Corporate resources include administration, financial, legal, environmental, human resources and real estate activities that
are not allocated to operations and are excluded from operating profit.



|                            |  |                    |         |                   |   |                  |  |                  |           |  |   |          
|--------------------------- |  | ------------------ | ------- | ----------------- | - | ---------------- |  | ---------------- | --------- |  | - | ---------
|                            |  | Three months ended |         | Nine months ended
|In thousands                |  | February 29,2004   |         | February 28,2003  |   | February 29,2004 |  | February 28,2003
|TOTAL SALES                 |  |                    |         |                   |   |                  |  |                  |           |  |   |          
|Cement                      |  | $                  | 80,019  |                   | $ | 69,953           |  | $                | 260,442   |  | $ | 246,657  
|Ready-mix                   |  |                    | 43,231  |                   |   | 39,113           |  |                  | 150,884   |  |   | 150,388  
|Stone, sand & gravel        |  |                    | 23,990  |                   |   | 21,458           |  |                  | 87,079    |  |   | 75,448   
|Structural mills            |  |                    | 169,758 |                   |   | 105,953          |  |                  | 418,673   |  |   | 343,452  
|Bar mill                    |  |                    | 49,757  |                   |   | 26,928           |  |                  | 119,455   |  |   | 84,373   
|                            |  |                    |         |                  
|UNITS SHIPPED               |  |                    |         |                   |   |                  |  |                  |           |  |   |          
|Cement (tons)               |  |                    | 1,179   |                   |   | 1,032            |  |                  | 3,834     |  |   | 3,559    
|Ready-mix (cubic yards)     |  |                    | 734     |                   |   | 677              |  |                  | 2,597     |  |   | 2,596    
|Stone, sand & gravel (tons) |  |                    | 4,490   |                   |   | 3,891            |  |                  | 16,140    |  |   | 13,503   
|Structural mills (tons)     |  |                    | 438     |                   |   | 348              |  |                  | 1,195     |  |   | 1,093    
|Bar mills (tons)            |  |                    | 132     |                   |   | 84               |  |                  | 337       |  |   | 264      
|                            |  |                    |         |                  
|NET SALES                   |  |                    |         |                   |   |                  |  |                  |           |  |   |          
|Cement                      |  | $                  | 67,973  |                   | $ | 58,368           |  | $                | 218,745   |  | $ | 202,216  
|Ready-mix                   |  |                    | 43,210  |                   |   | 39,072           |  |                  | 150,639   |  |   | 150,232  
|Stone, sand & gravel        |  |                    | 17,541  |                   |   | 14,827           |  |                  | 63,948    |  |   | 52,235   
|Other products              |  |                    | 24,900  |                   |   | 23,999           |  |                  | 79,246    |  |   | 77,539   
|Delivery fees               |  |                    | 12,656  |                   |   | 11,553           |  |                  | 42,482    |  |   | 38,739   
|                            |  |                    |         |                   |   |                  |  |                  |           |  |   |          
|TOTAL CAC                   |  |                    | 166,280 |                   |   | 147,819          |  |                  | 555,060   |  |   | 520,961  
|                            |  |                    |         |                  
|Structural mills            |  |                    | 169,758 |                   |   | 105,953          |  |                  | 418,673   |  |   | 343,452  
|Bar mill                    |  |                    | 49,757  |                   |   | 26,928           |  |                  | 119,455   |  |   | 84,373   
|Other products              |  |                    | 7,094   |                   |   | 4,482            |  |                  | 18,058    |  |   | 13,025   
|Delivery fees               |  |                    | 15,081  |                   |   | 11,229           |  |                  | 41,321    |  |   | 38,267   
|                            |  |                    |         |                   |   |                  |  |                  |           |  |   |          
|TOTAL STEEL                 |  |                    | 241,690 |                   |   | 148,592          |  |                  | 597,507   |  |   | 479,117  
|                            |  |                    |         |                   |   |                  |  |                  |           |  |   |          
|TOTAL NET SALES             |  | $                  | 407,970 |                   | $ | 296,411          |  | $                | 1,152,567 |  | $ | 1,000,078
|                            |  |                    |         |                   |   |                  |  |                  |           |  |   |          



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|                                             |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|-------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | ---------------- |  | - | ---------------- | - |  | - | ------- | -
|                                             |  | Three months ended |         |   | Nine months ended |  
|In thousands                                 |  | February 29,2004   |         |   | February 28,2003  |   |         | February 29,2004 |  |   | February 28,2003 |  
|CAC OPERATIONS                               |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|Gross profit                                 |  | $                  | 34,009  |   |                   | $ | 26,910  |                  |  | $ | 121,592          |   |  | $ | 121,258 |  
|Less: Depreciation, depletion & amortization |  |                    | 11,333  |   |                   |   | 11,793  |                  |  |   | 34,245           |   |  |   | 35,681  |  
|Selling, general & administrative            |  |                    | 9,506   |   |                   |   | 8,763   |                  |  |   | 32,238           |   |  |   | 30,248  |  
|Other income                                 |  |                    | (34,716 | ) |                   |   | (357    | )                |  |   | (36,684          | ) |  |   | (1,435  | )
|                                             |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|OPERATING PROFIT                             |  |                    | 47,886  |   |                   |   | 6,711   |                  |  |   | 91,793           |   |  |   | 56,764  |  
|                                             |  |                    |         |  
|STEEL OPERATIONS                             |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|Gross profit                                 |  |                    | 28,620  |   |                   |   | 4,749   |                  |  |   | 46,544           |   |  |   | 22,011  |  
|Less: Depreciation & amortization            |  |                    | 12,287  |   |                   |   | 11,969  |                  |  |   | 37,234           |   |  |   | 35,924  |  
|Selling, general & administrative            |  |                    | 5,623   |   |                   |   | 4,958   |                  |  |   | 18,661           |   |  |   | 15,540  |  
|Other income                                 |  |                    | (884    | ) |                   |   | 315     |                  |  |   | (5,025           | ) |  |   | 131     |  
|                                             |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|OPERATING PROFIT (LOSS)                      |  |                    | 11,594  |   |                   |   | (12,493 | )                |  |   | (4,326           | ) |  |   | (29,584 | )
|                                             |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|TOTAL OPERATING PROFIT (LOSS)                |  |                    | 59,480  |   |                   |   | (5,782  | )                |  |   | 87,467           |   |  |   | 27,180  |  
|                                             |  |                    |         |  
|CORPORATE RESOURCES                          |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|Other income                                 |  |                    | 1,001   |   |                   |   | 405     |                  |  |   | 1,178            |   |  |   | 1,649   |  
|Less: Depreciation & amortization            |  |                    | 468     |   |                   |   | 482     |                  |  |   | 1,418            |   |  |   | 1,372   |  
|Selling, general & administrative            |  |                    | 7,065   |   |                   |   | 8,846   |                  |  |   | 20,175           |   |  |   | 22,992  |  
|                                             |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|                                             |  |                    | (6,532  | ) |                   |   | (8,923  | )                |  |   | (20,415          | ) |  |   | (22,715 | )
|                                             |  |                    |         |  
|INTEREST EXPENSE                             |  |                    | (17,961 | ) |                   |   | (11,231 | )                |  |   | (55,884          | ) |  |   | (34,121 | )
|                                             |  |                    |         |  
|LOSS ON EARLY RETIREMENT OF DEBT             |  |                    |        |   |                   |   |        |                  |  |   | (11,246          | ) |  |   |        |  
|                                             |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  
|                                             |  |                    |         |  
|INCOME (LOSS) BEFORE TAXES & OTHER ITEMS     |  | $                  | 34,987  |   |                   | $ | (25,936 | )                |  | $ | (78              | ) |  | $ | (29,656 | )
|                                             |  |                    |         |   |                   |   |         |                  |  |   |                  |   |  |   |         |  



RESULTS OF OPERATIONS



CAC Operations



CAC operating profit was $47.9 million for the current quarter and $91.8
million for the current nine-month period, an increase from the prior year periods of $41.2 million and $35.0 million, respectively. Contributing to the increase in operating profit in the current periods was other income in the amount of $34.4
million from the February 2004 sale of the Companys brick production facilities in Texas and Louisiana. Higher shipments for all major CAC products also contributed to the increase in operating profit in the current quarter with prior year
shipments impacted by unfavorable weather patterns in the Companys Texas markets. Over the past nine months the Company has experienced improving overall demand for its CAC products.



Net Sales. CAC sales were $166.3 million for the current quarter, an
increase of 12% from the prior year period. Total cement sales increased $10.1 million on 14% higher shipments at comparable average trade prices. Ready-mix sales increased $4.1 million on 8% higher volume and 2% higher average trade prices.
Aggregate sales increased $2.5 million on 15% higher shipments at 7% higher average trade prices. CAC sales were $555.1 million for the current nine-month period, an increase of 7% from the prior year period. Total cement sales increased $13.8
million on 8% higher shipments and 2% lower average trade prices. Ready-mix sales were comparable to the prior year period. Aggregate sales increased $11.6 million on 20% higher shipments and 3% lower average trade prices.



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Operating Costs. CAC costs including depreciation, depletion and amortization were $143.4 million
for the current quarter and $467.1 million for the current nine-month period, an increase from the prior year periods of $11.0 million and $32.7 million, respectively, as a result of higher shipments. Higher maintenance and energy costs incurred at
the Companys Texas cement plants in the August 2003 quarter also impacted costs in the current nine-month period.



Selling, general and administrative expense including depreciation, depletion and amortization was $9.7 million for the current quarter and $32.9 million
for the current nine-month period, an increase from the prior year periods of $600,000 and $1.6 million, respectively, as a result of higher incentive, insurance and bad debt expense.



Other income for the current quarter and nine-month periods includes $34.4 million from the sale of the Companys brick
production facilities in Texas and Louisiana.



Steel Operations



Steel operating profit was $11.6 million for the current
quarter, an increase of $24.1 million from the prior year period as a result of higher shipments and prices, and improved production rates and efficiencies at the Virginia facility. Operating loss was $4.3 million for the current nine-month period,
improving $25.3 million from the prior year period. During the current nine-month period rapidly escalating raw material costs have affected results. With the increased selling prices and the implementation of a raw material surcharge during the
quarter, margins have begun to recover.



Net Sales.
Steel sales were $241.7 million for the current quarter, an increase of 63% from the prior year period. Structural steel sales increased $63.8 million on 26% higher shipments and 27% higher selling prices. Bar mill sales increased $22.8 million on
57% higher shipments and 18% higher average selling prices. Steel sales were $597.5 million for the current nine-month period, an increase of 25% from the prior year period. Structural steel sales increased $75.2 million on 9% higher shipments and
12% higher average selling prices. Bar mill sales increased $35.1 million on 27% higher shipments and 11% higher average selling prices.



Operating Costs. Steel costs including depreciation and amortization were $225.4 million for the current quarter and $588.2 million for the current
nine-month period, an increase from the prior year periods of $69.5 million and $95.2 million, respectively. Higher shipments in the current quarter and nine-month period increased costs $43.8 million and $55.9 million, respectively. Costs also
increased as a result of higher raw material costs that were partially offset in the current quarter by improved operating efficiencies at the Virginia facility due to increased production levels.



The Company has experienced unprecedented increases in the cost of steel
scrap, the principal raw material used in its steel production. For example, over the past three months the American Metal Market published shredded auto scrap price for Chicago has increased approximately 75%. As a result of these increases
in scrap costs the Company incurred a charge to cost of products sold of $8.1 million in the current nine-month period, compared to a charge of $2.6 million in the prior year period due to valuing inventories using the last-in, first-out
(LIFO) method of accounting.



Selling, general and
administration expense was $5.6 million for the current quarter and $18.7 million for the current nine-month period, an increase from the prior year periods of $700,000 and $3.1 million, respectively, as a result of higher bad debt and general
expenses.



Other income for the current nine-month period
includes $4.2 million obtained from the Companys litigation against certain graphite electrode suppliers in the August 2003 quarter.



Corporate Resources



Selling, general and administrative expense including depreciation and amortization was $7.5 million for the current quarter and $21.6 million for the
current nine-month period, a decrease from the prior year periods of $1.8 million and $2.8 million, respectively. The decreased expense was primarily the result of lower bad debt expense and the effect of the termination of the Companys
agreement to sell receivables.



Other income increased $600,000
in the current quarter on higher real estate income and decreased $500,000 in the current nine-month period due to lower interest and investment income.



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Interest Expense



Interest expense was $18.0 million for the current quarter and $55.9 million for the current nine-month period, an increase from the prior year periods of
$6.7 million and $21.8 million, respectively. The increase was the result of the June 2003 refinancing which added approximately 4% to the Companys overall average effective interest rate and increased the average outstanding debt. Interest
expense in the current quarter and nine-month periods was reduced $1.9 million and $4.2 million, respectively, as a result of interest rate swaps entered into on $300 million of the Companys new senior notes.



As discussed in New Accounting Pronouncements on pages 31 and 32,
the Company no longer reports dividend distributions on the mandatorily redeemable preferred securities on its statements of operations. Instead, the Company reports interest expense on its convertible subordinated debentures. While having no
overall effect on the Companys net income or loss, the accounting change increased the interest expense in each quarter and nine-month period presented by $2.8 million and $8.2 million, respectively.



Loss on Early Retirement of Debt



As a result of the June 2003 refinancing, the Company recognized an ordinary
loss on early retirement of debt of $11.2 million. The loss represented $8.5 million in premium or consent payments to holders of the existing senior notes and a write-off of $2.7 million of debt issuance costs associated with the debt repaid.



Income Taxes



Federal income taxes for the interim periods ended February 29, 2004 and
February 28, 2003, have been included in the accompanying financial statements on the basis of an estimated annual rate. The primary reason that the tax rate differs from the 35% statutory corporate rate is due to percentage depletion that is tax
deductible and state income tax expense. Applying these differences to the estimated current year pre-tax income resulted in an estimated annualized effective tax rate for 2004 of 26.2% compared to 43.9% for 2003. The tax benefit attributed to
cumulative effect of accounting change is based on the incremental tax rate of 35%.



Cumulative Effect of Accounting ChangeNet of Tax



Effective June 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143 Accounting for Asset Retirement Obligations, which applies to legal obligations associated with the retirement of long-lived assets.
The Company incurs legal obligations for asset retirement as part of its normal CAC and Steel operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. Application of the new rules resulted in a
cumulative charge of $1.1 million, net of tax of $600,000.



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LIQUIDITY AND CAPITAL RESOURCES



To improve liquidity and provide more financial and operating flexibility,
the Company on June 6, 2003 issued $600 million of 10.25% senior notes maturing June 15, 2011. The net proceeds were used to repay $473.5 million of the outstanding debt at May 31, 2003. The remaining proceeds were applied toward the cost of the
Companys agreement whereby the entire outstanding interest in the defined pool of trade receivables previously sold was repurchased and the agreement to sell receivables was terminated.



The new senior notes represent general unsecured senior obligations of the
Company. The new senior notes were issued by Texas Industries, Inc. (the parent company), which has no independent assets or operations, excluding amounts related to its investments in its subsidiaries and financing activities. All consolidated
subsidiaries of the Company are 100% owned and excluding minor subsidiaries without operations or material assets, have provided a joint and several, full and unconditional guarantee of the securities. The terms of the notes contain covenants that
among other things provide for restrictions on the payment of dividends or repurchasing common stock, making certain investments, incurring additional debt or selling preferred stock, creating liens, and transferring assets. The Company is also
required to reinvest through capital expenditures the net proceeds from asset sales within 360 days of their receipt. To the extent that the amount not reinvested exceeds $10 million, the Company must make an offer to all note holders to purchase
the maximum principal amount of notes that may be purchased out of the remaining proceeds at an offer price equal to 100% of principal amount plus accrued and unpaid interest and liquidated damages, if any, to the date of purchase. At February 29,
2004, the Company had a requirement to reinvest through capital expenditures $30.4 million over the next 360 days. These capital expenditures may be funded, if necessary, from borrowings under the Companys long-term senior secured credit
facility. At any time prior to June 15, 2006, the Company may redeem up to 35% of the aggregate principal amount of the notes at a redemption price of 110.25% of the principal amount thereof, plus accrued interest, with the net cash proceeds from
certain equity offerings. In addition, at any time on or prior to June 15, 2007, the Company may redeem all or part of the notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a make-whole premium.
After June 15, 2007, the Company may redeem all or a part of the notes at a redemption price of 105.125% in 2007, 102.563% in 2008 and 100% in 2009 and thereafter.



In addition, the Company entered into a new senior secured credit facility, which provides up to $200 million of available
borrowings, subject to a borrowing base. The facility matures in June 2007, with borrowings limited based on the net amounts of eligible accounts receivable and inventory. Borrowings bear annual interest at either the LIBOR based rate plus 2.75% or
the prime rate plus .75%. These interest rate margins are subject to performance price adjustments. Commitment fees at an annual rate of .375% are to be paid on the unused portion of the facility. The Company may terminate the facility at any time,
and under certain circumstances may be required to pay a termination fee.



The senior secured credit facility is collateralized by first priority liens on substantially all of the Companys existing and future acquired accounts receivable, inventory, deposit accounts and certain of its
general intangibles. The agreement contains covenants restricting, among other things, prepayment or redemption of notes, distributions, dividends and repurchases of capital stock and other equity interests, acquisitions and investments,
indebtedness, liens and affiliate transactions. In addition, there is the requirement to meet certain financial tests and to maintain certain financial ratios if the excess availability under the senior secured credit facility falls below $30
million, including maintaining a fixed charge coverage ratio and meeting a minimum tangible net worth test.



No borrowings were outstanding under the senior secured credit facility at February 29, 2004, however, $22.6 million of the facility was utilized to
support letters of credit.



The Companys ability to incur
additional debt is currently limited to borrowings available under the senior secured credit facility. The payment of cash dividends on common stock is currently limited to an annual amount of $7.0 million.



The Company entered into interest rate swap agreements that have the economic
effect of modifying the interest obligations associated with $200 million and $100 million of the senior notes, effective August 5, 2003 and January 30, 2004, respectively, such that the interest payable on the senior notes effectively becomes
variable based on six month LIBOR, set on June 15thand December 15thof each year. The interest rate swaps have been designated as fair value hedges and have no ineffective portion. The notional amounts and the termination
dates match the principal amounts and maturities of the $300 million portion of the outstanding senior notes. As a result of the interest rate swaps, the current effective interest rate on the hedged portion of the senior notes was reduced to 6.92%.



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The Company historically has financed major capital expansion projects with cash from operations and
long-term borrowings. Working capital requirements and capital expenditures for normal replacement and technological upgrades of existing equipment and expansions of its operations are funded with cash from operations. The fiscal year 2004 capital
expenditure budget for these activities is estimated currently at approximately $40 million. In addition, the Company leases certain mobile and other equipment used in its operations under operating leases that in the normal course of business are
renewed or replaced by subsequent leases.



The Company expects
cash from operations and borrowings under the new senior secured credit facility to be sufficient to provide funds for capital expenditure commitments, scheduled debt repayments and working capital needs for at least the next year.



Cash Flows



Net cash used by operating activities was $61.0 million, compared to $51.0 million provided in the prior year period. The
decrease in operating cash flow of $112.0 million was primarily the result of the Companys repurchase of trade receivables in the amount of $115.5 million. The repurchase was funded out of the proceeds of the June 2003 refinancing. Excluding
receivable repurchases cash provided by operating activities declined $10.5 million from the prior year primarily as a result of the effect of higher Steel prices and increased CAC and Steel shipments on working capital items.



Net cash provided by investing activities was $13.8 million, compared to
$30.8 million used in the prior year period. Capital expenditures for normal replacement and technological upgrades of existing equipment and expansions of the Companys operations excluding major plant expansions was $24.7 million, down $16.4
million from the prior year period. Proceeds from disposal of assets in the current year primarily resulted from the sale of the Companys brick production facilities in Texas and Louisiana. Proceeds from disposal of assets in the prior year
included collection of notes receivable related to disposals of surplus assets in 2001.



Net cash provided by financing activities was $97.8 million, compared to $22.1 million used in the prior year period. The proceeds from the June 2003 refinancing net of issuance and retirement costs funded the
repurchase of trade receivables. The Companys quarterly cash dividend of $.075 per common share remained unchanged from the prior year period.



OTHER ITEMS



Litigation



In November 1998, Chaparral Steel Company, a 100% owned subsidiary, filed an action in the District Court of Ellis County, Texas against certain graphite
electrode suppliers seeking damages for illegal restraints of trade in the sale of graphite electrodes. During the current nine-month period the Company obtained a settlement from a producer of graphite electrodes in the net amount of $4.2 million.
The Company has now obtained settlements from all the major producers named in the action and does not anticipate any material future settlements.



Environmental Matters



The Company is subject to federal, state and local environmental laws and regulations concerning, among other matters, air emissions, furnace dust
disposal and wastewater discharge. The Company believes it is in substantial compliance with applicable environmental laws and regulations. However, from time to time the Company receives claims from federal and state environmental regulatory
agencies and entities asserting that the Company is or may be in violation of certain environmental laws and regulations. Based on its experience and the information currently available to it, the Company believes that such claims will not have a
material impact on its financial condition or results of operations. Despite the Companys compliance and experience, it is possible that the Company could be held liable for future charges which might be material but are not currently known or
estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by the Company.





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Market Risk



The Company has not historically entered into derivatives or other financial instruments for trading or speculative purposes. Because of the short
duration of the Companys investments, changes in market interest rates would not have a significant impact on their fair value.



The June 2003 refinancing increased the amount of fixed rate debt outstanding and the Companys overall average effective interest rate. The fair
value of the debt will vary as interest rates change.



Effective August 5, 2003 and January 30, 2004, the Company entered into interest rate swaps that change the characteristics of the interest payments on $300 million of the underlying fixed rate debt from fixed-rate payments to short-term
LIBOR-based variable rate payments in order to achieve a mix of interest rates on the Companys long-term debt which, over time, is expected to moderate financing costs. The swaps are sensitive to interest rate changes. For example, if
short-term interest rates increase (decrease) by one percentage point from the date of the refinancing, annual pretax interest expense would increase (decrease) by $3 million.



Critical Accounting Policies



The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported. Changes in the facts and circumstances could have a significant impact on the resulting financial statements. The critical accounting policies that affect its more complex judgments and
estimates are described in the Companys Annual Report on Form 10-K for the year ended May 31, 2003.



Effective June 1, 2003, the Company adopted Statement of Accounting Standards No. 143, Accounting for Asset Retirement Obligations, which
applies to legal obligations associated with the retirement of long-lived assets. The Company is required to recognize the fair value of an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can
be made. The Company incurs legal obligations for asset retirement as part of its normal CAC and Steel operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. The Company considers asset retirement
obligations to be a critical accounting policy. Determining the amount of an asset retirement liability requires estimating the future cost of contracting with third parties to perform the obligation. The estimate is significantly impacted by, among
other considerations, managements assumptions regarding the scope of the work required, labor costs, inflation rates, market-risk premiums and closure dates.



New Accounting Pronouncements



Effective June 1, 2003, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections. For most companies, SFAS No. 145 will require gains and losses on extinguishments of debt to be classified as income or loss from continuing
operations rather than as extraordinary items as previously required under SFAS No. 4. Extraordinary treatment will be required for certain extinguishments as provided in APB Opinion No. 30. SFAS No. 145 also amends SFAS No. 13 to require certain
modifications to capital leases be treated as a sale-leaseback and modifies the accounting for sub-leases when the original lessee remains a secondary obligor (or guarantor). Its adoption required that the loss on early retirement of debt incurred
in the nine-month period ended February 29, 2004 be recognized as an ordinary loss.



Effective June 1, 2003, the Company adopted SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of both liabilities and equity. The Company has no financial instruments for which a change in classification was required.



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Effective February 29, 2004, the Company adopted the provisions of Financial Accounting Standards Board
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. Prior to its adoption the Company consolidated all majority owned subsidiaries. FIN 46 provides that a variable interest entity is to be
consolidated by its primary beneficiary. The Company has a variable interest in a subsidiary trust that has mandatorily redeemable preferred securities outstanding with a liquidation value of $199.9 million. These securities were previously reported
on the Companys balance sheet as Company-obligated Mandatorily Redeemable Preferred Securities of Subsidiary Holding Solely Company Convertible Debentures. The trust is a variable interest entity under FIN 46 because the Company has a limited
ability to make decisions about its activities. However, the Company is not the primary beneficiary of the trust, and therefore, the trust and the mandatorily redeemable preferred securities issued by the trust are no longer reported on the
Companys balance sheet. Instead, the convertible subordinated debentures held by the trust which previously were eliminated in the Companys consolidated financial statements are reported on its balance sheet. Distributions on the
mandatorily redeemable preferred securities are no longer reported on the Companys statements of operations, but interest on the debentures is recorded as interest expense. These reclassifications are reflected for all periods presented and
have no overall effect on the Companys results of operations or financial position.



Cautionary Statement for Purposes of the Safe Harbor Provisions of the

Private Securities Litigation
Reform Act of 1995



Certain statements contained in this
quarterly report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks, uncertainties and other factors, which could cause actual results to differ
materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the impact of competitive pressures and changing economic and financial conditions on the
Companys business, construction activity in the Companys markets, abnormal periods of inclement weather, changes in the cost of raw materials, fuel and energy, and the impact of environmental laws and other regulations. For further
information refer to the Companys Annual Report on Form 10-K for the year ended May 31, 2003.



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|Item 4. | Controls and Procedures
|------- | -----------------------



The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported
within the specified time periods. As of the end of the period covered by this Quarterly Report on Form 10-Q, the Companys Chief Executive Officer and Chief Financial Officer evaluated, with the participation of the Companys management,
the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, the Companys
Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective. There were no significant changes in the Companys internal controls over financial reporting that occurred
during the Companys most recent fiscal quarter that have materially affected or is reasonably likely to materially affect the Companys internal control over financial reporting.



PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------



The
information required by this item is included in the section of the Notes to Consolidated Financial Statements entitled Legal Proceedings and Contingent Liabilities presented in Part I on page 15 and incorporated herein by reference.



|Item 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



The following exhibits are included herein:



| | (15.1) | Letter re: Unaudited Interim Financial Information
| | ------ | --------------------------------------------------



| | (31.1) | Certification of Chief Executive Officer
| | ------ | ----------------------------------------



| | (31.2) | Certification of Chief Financial Officer
| | ------ | ----------------------------------------



| | (32.1) | Section 1350 Certification of Chief Executive Officer
| | ------ | -----------------------------------------------------



| | (32.2) | Section 1350 Certification of Chief Financial Officer
| | ------ | -----------------------------------------------------



The remaining exhibits have been omitted because they are not applicable or the information required therein is included elsewhere in the financial
statements or notes thereto.



The Registrant did not file any
reports on Form 8-K during the three-month period ended February 29, 2004.



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|              |  |  |  |                                                                                                             
|------------- |  |  |  | ------------------------------------------------------------------------------------------------------------
|              |  |  |  | TEXAS INDUSTRIES, INC.                                                                                      
|              |  | 
|April 8, 2004 |  |  |  | /s/    Richard M. Fowler                                                                                    
|              |  |  |  |                                                                                                             
|              |  |  |  | Richard M. Fowler Executive Vice
PresidentFinance and Chief Financial Officer (Principal Financial Officer)

|              |  |  |  |                                                                                                  
|------------- |  |  |  | -------------------------------------------------------------------------------------------------
|              |  |  |  |                                                                                                  
|              |  | 
|April 8, 2004 |  |  |  | /s/    James R. McCraw                                                                           
|              |  |  |  |                                                                                                  
|              |  |  |  | James R. McCraw Vice PresidentAccounting and
Information Services (Principal Accounting Officer)



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INDEX TO EXHIBITS



|         |  |                                                       |  |     
|-------- |  | ----------------------------------------------------- |  | ----
|Exhibits |  |                                                       |  | Page
|15.1     |  | Letter re: Unaudited Interim Financial Information    |  | 36  
|31.1     |  | Certification of Chief Executive Officer              |  | 37  
|31.2     |  | Certification of Chief Financial Officer              |  | 38  
|32.1     |  | Section 1350 Certification of Chief Executive Officer |  | 39  
|32.2     |  | Section 1350 Certification of Chief Financial Officer |  | 40  



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